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5301. The Decline of Activist Stabilization Policy: Natural Rate Misperceptions, Learning, and Expectations

Author:
Athanasios Orphanides and John C. Williams
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of the natural rate of unemployment during the late 1960s and 1970s on the formation of expectations and macroeconomic outcomes. We find that the combination of monetary policy directed at tight stabilization of unemployment near its perceived natural rate and large real-time errors in estimates of the natural rate uprooted heretofore quiescent inflation expectations and destabilized the economy. Had monetary policy reacted less aggressively to perceived unemployment gaps, inflation expectations would have remained anchored and the stagflation of the 1970s would have been avoided. Indeed, we find that less activist policies would have been more effective at stabilizing both inflation and unemployment. We argue that policymakers, learning from the experience of the 1970s, eschewed activist policies in favor of policies that concentrated on the achievement of price stability, contributing to the subsequent improvements in macroeconomic performance of the U.S. economy.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

5302. Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment

Author:
Tamim Bayoumi, Douglas Laxton, and Paolo Pesenti
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Using a general-equilibrium simulation model featuring nominal rigidities and monopolistic competition in product and labor markets, this paper estimates the macroeconomic benefits and international spillovers of an increase in competition. After calibrating the model to the euro area vs. the rest of the industrial world, the paper draws three conclusions. First, greater competition produces large effects on macroeconomic performance, as measured by standard indicators. In particular, we show that differences in competition can account for over half of the current gap in GDP per capita between the euro area and the US. Second, it may improve macroeconomic management by increasing the responsiveness of wages and prices to market conditions. Third, greater competition can generate positive spillovers to the rest of the world through its impact on the terms of trade.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
Europe

5303. Monetary Discretion, Pricing Complementarity and Dynamic Multiple Equilibria

Author:
Robert G. King and Alexander L. Wolman
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In a plain-vanilla New Keynesian model with two-period staggered price-setting, discretionary monetary policy leads to multiple equilibria. Complementarity between the pricing decisions of forward-looking firms underlies the multiplicity, which is intrinsically dynamic in nature. At each point in time, the discretionary monetary authority optimally accommodates the level of predetermined prices when setting the money supply because it is concerned solely about real activity. Hence, if other firms set a high price in the current period, an individual firm will optimally choose a high price because it knows that the monetary authority next period will accommodate with a high money supply. Under commitment, the mechanism generating complementarity is absent: the monetary authority commits not to respond to future predetermined prices. Multiple equilibria also arise in other similar contexts where (i) a policymaker cannot commit, and (ii) forward-looking agents determine a state variable to which future policy responds.
Topic:
Economics, Government, and International Trade and Finance

5304. The Optimal Degree of Discretion in Monetary Policy

Author:
Susan Athey, Andrew Atkeson, and Patrick J. Kehoe
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
How much discretion should the monetary authority have in setting its policy? This question is analyzed in an economy with an agreed-upon social welfare function that depends on the randomly fluctuating state of the economy. The monetary authority has private information about that state. In the model, well-designed rules trade off society's desire to give the monetary authority discretion to react to its private information against society's need to guard against the time inconsistency problem arising from the temptation to stimulate the economy with unexpected inflation. Although this dynamic mechanism design problem seems complex, society can implement the optimal policy simply by legislating an inflation cap that specifies the highest allowable inflation rate. The more severe the time inconsistency problem, the more tightly the cap constrains policy and the smaller is the degree of discretion. As this problem becomes sufficiently severe, the optimal degree of discretion is none.
Topic:
Civil Society, Economics, Government, and International Trade and Finance
Political Geography:
Europe

5305. Equal Size, Equal Role? Interest Rate Interdependence Between the Euro Area and the United States

Author:
Michael Ehrmann and Marcel Fratzscher
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper investigates whether the degree and the nature of economic and monetary policy interdependence between the United States and the euro area have changed with the advent of EMU. Using real-time data, it addresses this issue from the perspective of financial markets by analysing the effects of monetary policy announcements and macroeconomic news on daily interest rates in the United States and the euro area. First, the paper finds that the interdependence of money markets has increased strongly around EMU. Although spillover effects from the United States to the euro area remain stronger than in the opposite direction, we present evidence that US markets have started reacting also to euro area developments since the onset of EMU. Second, beyond these general linkages, the paper finds that certain macroeconomic news about the US economy has a large and significant effect on euro area money markets, and that these effects have become stronger in recent years. Finally, we show that US macroeconomic news has become good leading indicators for economic developments in the euro area. This indicates that the higher money market interdependence between the United States and the euro area is at least partly explained by the increased real integration of the two economies in recent years.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

5306. The Great Inflation of the 1970s

Author:
Fabrice Collard and Harris Dellas
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Was the high inflation of the 1970s mostly due to incomplete information about the structure of the economy (an unavoidable mistake as suggested by Orphanides, 2000)? Or, to weak reaction to expected inflation and/or excessive policy activism that led to indeterminacies (a policy mistake, a scenario suggested by Clarida, Gali and Gertler, 2000)? We study this question within the NNS model with policy commitment and imperfect information, requiring that the model have satisfactory overall empirical performance. We find that both explanations do a good job in accounting for the great inflation. Even with the commonly used specification of the interest policy rule, high and persistent inflation can occur following a significant productivity slowdown if policymakers significantly and persistently underestimate ”core” inflation.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States

5307. Ramsey Monetary Policy and International Relative Prices

Author:
Ester Faia and Tommaso Monacelli
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We analyze welfare maximizing monetary policy in a dynamic two-country model with price stickiness and imperfect competition. In this context, a typical terms of trade externality affects policy interaction between independent monetary authorities. Unlike the existing literature, we remain consistent to a public finance approach by an explicit consideration of all the distortions that are relevant to the Ramsey planner. This strategy entails two main advantages. First, it allows an accurate characterization of optimal policy in an economy that evolves around a steady-state which is not necessarily efficient. Second, it allows to describe a full range of alternative dynamic equilibria when price setters in both countries are completely forward looking and households' preferences are not restricted. In this context, we study optimal policy both in the long-run and along a dynamic path, and we compare optimal commitment policy under Nash competition and under cooperation. By deriving a second order accurate solution to the policy functions, we also characterize the welfare gains from international policy cooperation.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

5308. Indeterminacy with Inflation-Forecast-Based Rules in a Two-Bloc Model

Author:
Nicoletta Batini, Paul Levine, and Joseph Pearlman
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We examine the performance of forward-looking inflation-forecast-based rules in open economies. In a New Keynesian two-bloc model, a methodology first employed by Batini and Pearlman (2002) is used to obtain analytically the feedback parameters/horizon pairs associated with unique and stable equi-libria. Three key findings emerge: first, indeterminacy occurs for any value of the feedback parameter on inflation if the forecast horizon lies too far into the future. Second, the problem of indeterminacy is intrinsically more serious in the open economy. Third, the problem is compounded further in the open economy when central banks respond to expected consumer, rather than pro-ducer price inflation.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

5309. Sand in the Wheels of the Labor Market: The Effect of Firing Costs on Employment

Author:
Andrea De Michelis
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines the effects of firing costs in a dynamic general equilibrium model where firms face stochastic demand. It derives analytically two simple closed-form equations, one for the supply of labor, the other for its demand. These equations determine the comparative static effects of changes in firing costs on the labor market. When negative shocks are more likely to occur than positive shocks, and when the frequency of these shocks is high, firing costs have a substantial negative impact on aggregate employment. In addition, product market integration, as it has occurred in the formation of the European Union, induces firms to be more wary of future possible downturns and therefore intensifies the negative consequences of firing costs.
Topic:
International Relations, Economics, and International Trade and Finance

5310. Price-level Determinacy, Lower Bounds on the Nominal Interest Rate, and Liquidity Traps

Author:
Dale W. Henderson and Ragna Alstadheim
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We consider monetary-policy rules with inflation-rate targets and interest-rate or money-growth instruments using a flexible-price, perfect-foresight model. There is always a locally-unique target equilibrium. There may also be below-target equilibria (BTE) with inflation always below target and constant, asymptotically approaching or eventually reaching a below-target value, or oscillating. Liquidity traps are neither necessary nor sufficient for BTE which can arise if monetary policy keeps the interest rate above a lower bound. We construct monetary rules that preclude BTE when fiscal policy does not. Plausible fiscal policies preclude BTE for any monetary policy; those policies exclude surpluses and, possibly, balanced budgets.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

5311. Foreign Participation in Local-Currency Bond Markets

Author:
Francis E. Warnock and John D. Burger
Publication Date:
02-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We analyze the development of, and foreign participation in, 49 local bond markets. Countries with stable inflation rates and strong creditor rights have more developed local bond markets and rely less on foreign-currency-denominated bonds. Less developed bond markets have returns characterized by high variance and negative skewness, factors eschewed by U.S. investors. Results based on a three-moment CAPM indicate, however, that it is diversifiable idiosyncratic risk that U.S. investors appear to shun. Taken as a whole our results hint at a virtuous cycle of bond market development: Creditor friendly policies and laws can spark local bond market development that enables the development of derivatives markets and, in turn, attracts foreign participation.
Topic:
Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States

5312. Is China "Exporting Deflation"?

Author:
Steven B. Kamin, Mario Marazzi, and John W. Schindler
Publication Date:
01-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In the past few years, observers increasingly have pointed to China as a source of downward pressure on global prices. This paper evaluates the theoretical and empirical evidence bearing on the question of whether China's buoyant export growth has led to significant changes in the inflation performance of its trading partners. This evidence suggests that the impact of Chinese exports on global prices has been, while non-negligible, fairly modest. On a priori grounds, our theoretical analysis suggests that China's economy is still too small relative to the world economy to have much effect on global inflation: a back-of-the-envelope calculation puts that effect at about 1/3 percentage point in recent years. In terms of the empirical evidence, we identify a statistically significant effect of U.S. imports from China on U.S. import prices, but given the size of this effect and the relatively low share of imports in U.S. GDP, the ultimate impact on the U.S. consumer prices has likely been quite small. Moreover, imports from China had little apparent effect on U.S. producer prices. Finally, using a multi-country database of trade transactions, we estimate that since 1993, Chinese exports lowered annual import inflation in a large set of economies by 1/4 percentage point or less on average, similar to the prediction of our theoretical model.
Topic:
Economics and International Trade and Finance
Political Geography:
China and Asia

5313. Cash Flows and Discount Rates, Industry and Country Effects, and Co-Movement in Stock Returns

Author:
John Ammer and Jon Wongswan
Publication Date:
09-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines the relative importance of global, country-specific, and industry-specific factors in both the cash flow and discount rate components of equity returns between 1995 and 2003. Our framework draws upon previously separate literatures on country versus industry effects and (forward-looking) cash flow versus discount rate components of equity return innovations. We apply the Campbell (1991) decomposition for industry-by-country, all-country, global industry, and world market index returns so we can produce a richer characterization of same-industry and same-country effects in stock returns. Unlike previous equity return decomposition papers, we exploit information in equity analysts' earnings forecasts when projecting future variables from our reduced-form equation systems. Our findings confirm previous research that finds patterns of correlation that suggest a richer underlying structure than just a single common global factor. Furthermore, our results suggest that global, within-country, and same-industry effects are all important for both of the two key components of stock returns: news about future dividends and news about future discount rates. In particular, within-industry covariation in news about future discount rates appears to be just as important as within-country covariation in news about future discount rates. We also find that the idiosyncratic component of cash flow news is more important than the global component, while the reverse is true for news about future discount rates. Our results are broadly consistent with co-movement in future discount rates arising from perceptions of common elements of risk, rather than national market segmentation.
Topic:
International Relations, Economics, Industrial Policy, and International Trade and Finance

5314. The Role of the Central Public Market in a Twenty-first Century Metropolis

Author:
Maria Elena Ducci
Publication Date:
02-2004
Content Type:
Policy Brief
Institution:
The Wilson Center
Abstract:
This paper is designed to provoke discussion on the pros and cons of maintaining a public market in the center of a city such as Santiago, a metropolis of over 5 million inhabitants with serious air pollution and traffic problems.
Topic:
Civil Society, Development, Economics, and Markets

5315. US-Mexico Border Control in a Changing Economic and Security Context

Author:
Peter Andreas
Publication Date:
12-2004
Content Type:
Working Paper
Institution:
The Wilson Center
Abstract:
Although far from Washington and Mexico City, it is perhaps only a slight exaggeration to say that U.S.-Mexico relations begin and end at their shared 1,933-mile-long border. Indeed, the degree of harmony or conflict in the relationship increasingly depends on how the border and border control matters are politically managed. The border is both one of the busiest and one of the most heavily policed territorial lines in the world, where many of the most critical and sensitive issues in the bilateral relationship, such as trade, migration, and drug trafficking, come together. In fact, much of U.S. policy toward Mexico has been driven by the twin objectives of facilitating authorized border crossings and deterring unauthorized crossings. Balancing these tasks has always been politically and bureaucratically frustrating and cumbersome, but both the challenge and the stakes have grown substantially as counterterrorism has been added to and redefined the border control agenda since September 11, 2001.
Topic:
International Relations, Security, and Economics
Political Geography:
United States, Washington, and Mexico

5316. Making Doha a Developmental Round: What do the Developing Countries Want?

Author:
William Krist
Publication Date:
01-2004
Content Type:
Working Paper
Institution:
The Wilson Center
Abstract:
This report was prepared by William Krist, a Senior Policy Scholar at the Woodrow Wilson Center's Environmental Change and Security Project (ECSP). Mr. Krist is working on issues relating to trade and sustainable development. Before becoming a Woodrow Wilson scholar, Mr. Krist was senior vice president at the American Electronics Association, and prior to that, he had been Assistant Trade Representative for Industry in the Office of the U.S. Trade Representative. He has an MA in economics from George Washington University, and a BA from Swarthmore College.The Environmental Change and Security Project (ECSP) has been committed to exploration of the connections between environment, population and security since 1994. Through its meetings, its publications, its comprehensive Web site, and the original research carried out by its staff and scholars, ECSP serves as an information clearinghouse. ECSP is directed by Geoffrey D. Dabelko and is housed in the Wilson Center's Division of International Studies, headed by Robert S. Litwak.
Topic:
Agriculture, Development, Economics, International Trade and Finance, and Third World
Political Geography:
United States

5317. Peace-building and Development in Guatemala and Northern Ireland

Author:
Charles A. Reilly
Publication Date:
10-2004
Content Type:
Working Paper
Institution:
Kroc Institute for International Peace Studies, University of Notre Dame
Abstract:
Guatemala and Northern Ireland signed historic peace accords in 1996 and 1998 respectively. This paper, part of a longer term project comparing lessons learned from implementation in the two cases, focuses especially on Guatemala, making some middle range peace/development policy recommendations for that country's recently elected government and civil society organizations. Despite very different economic development levels, both countries are divided, find peace implementation difficult, and are heavily influenced by outside actors - including their own diaspora. Guatemala is deeply divided internally along class, race and ethnic lines, with more than 15% of its population in the U.S. (and close affinity with Mayan peoples who live across the Mexican border). Ireland too is divided along religious and ethnic lines, a border crosses the island. The North is linked politically to the United Kingdom, with social ties to emigrant populations there, in the south and in the United States. Guatemala, like its Central American neighbor El Salvador, embarked on peace-building with UN oversight, while the Northern Irish had United Kingdom and Irish Republic support for making peace. (Without pre-judging an eventual political resolution of the two Irelands, I'll refer to both Northern Ireland and the Irish Republic, since that peace process, like Guatemala's, necessarily transcends borders). When compared to Northern Ireland, Guatemalan religious differences are minor, and religious leaders, Catholic, Protestant and Mayan played key roles in the peace process. Emigration figures large in both settings, as do many centuries of colonial or imperial domination. Both countries have struggled with post-accord violence which has reached alarming levels in Guatemala. Peace and development are inseparable - hence I emphasize growth with equity issues that are cause and consequence of both conflicts.
Topic:
Development, Economics, and Peace Studies
Political Geography:
United States, United Kingdom, Europe, Central America, Mexico, and North Ireland

5318. The Challenge of Poor Governance and Corruption

Author:
Jens Chr.1 Andvig
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
The paper is the author's so-called “Opponent paper” to Susan Rose-Ackerman's proposals for good governance and anti-corruption policies at the Copenhagen Consensus 2004 meeting 24–28 May. There the most promising anti-corruption policies had to compete with other best policies at other fields such as fight against AIDS, malaria, hunger prevention, and so on. He argues that while corruption and governance problems are important and may prevent any other kind of policy to succeed, no really effective anti-corruption policy has so far been proposed, and if it was, we wouldn't know that it did. Hence, it would be unreasonable to make a strong claim for anti-corruption projects against their competitors.
Topic:
Economics, Human Welfare, and Politics
Political Geography:
Europe

5319. The Inferior Performance of State Owned Enterprises: Is it due to Ownership or Market Structure?

Author:
Leo A. Grünfeld, Eskil Goldeng, and Gabriel R. G. Benito
Publication Date:
03-2004
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
We analyze differences in performance between private companies (PCs) and state owned enterprises (SOEs), with an emphasis on the effects of market structure. We use a panel covering all registered companies during the 1990s in Norway, a country where SOEs play an important role in regular markets. Return on assets as well as costs measures are used as measures of performance in models that investigate markets where SOEs and PCs actually compete with each other. Although market shares and concentration affect performance, ownership identity still explains most of the inferior performance among SOEs.
Topic:
Development, Economics, Emerging Markets, and Industrial Policy
Political Geography:
Norway

5320. Export Credits and the Environment

Publication Date:
12-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Official export credit agencies (ECAs) support exports, much of which support goes to emerging economies, by providing loan guarantees, export credit insurance and direct loans. In 2002, the amount of business covered by such support was approximately USD 50 billion. Typically, officially supported export credits are provided to enable recipient countries to fund major capital goods and projects exported by the home country of the ECA, such as roads, mining, railways or airports.
Topic:
Economics, Environment, Industrial Policy, and International Trade and Finance

5321. Economic Survey of the Czech Republic, 2004

Publication Date:
11-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Following accession to the European Union the big issue for the Czech Republic is to strengthen growth prospects. Growth potential at present is somewhat above 3 per cent, implying a moderate pace of catch-up to living standards in the EU and elsewhere. There is room for greater ambition in growth performance, and it is welcome to see this reflected in the programme of the new Czech government. This Survey underscores four main challenges. Fiscal consolidation is the dominant challenge for macroeconomic policy, and is not only necessary to cope with ageing and to bring down the tax burden but is also needed to fulfil euro-area entry conditions. A welcome programme of fiscal reform has begun, including proposals for a system of multi-year aggregate spending ceilings and significant expenditure cuts. However, to date, mainly revenue-raising measures have been implemented while the full impact of expenditure measures is yet to be realised. The attempt to secure broad political consensus on pension reform is commendable, but it must be underscored that whatever reform is finally implemented, it will have to bring considerable fiscal savings. Health-care reform also has to deliver savings, but concrete proposals have yet to be made. To facilitate assessment of the true fiscal position, extra-budgetary funds need to be more fully integrated in mainstream government budgeting procedures. Also, with the further decentralisation of public services, the need for good budgeting practices and accountability in regional and municipal governments is all the more important. The Central Bank and the Ministry of Finance have formulated a transparent strategy for entering the euro area, that foresees minimising the time spent in ERM II. Annual reports will assess the economic conditions in relation to the Maastricht Criteria and a request to enter ERM II will only being made if the probability of a positive first assessment by the EU authorities is high. The choice of a 3 per cent inflation target for the run-up to euro entry is justifiable on medium-term grounds. However there may be some difficulty communicating the consistency of this target with the Maastricht criterion for price stability. The Czech authorities should therefore pay close attention to how the Maastricht criteria are interpreted and applied by the European Commission and the ECB and adjust their communication strategy accordingly. Most of the catch-up in living standards will have to come from boosting productivity growth. This means swifter re-allocation of resources across firms as well as stronger in-firm productivity growth. While the Czech Republic is a strong competitor for attracting foreign direct investment, policy towards poorly performing firms and business start-ups has problems, slowing down the exit and entry of firms. Bankruptcy procedures are cumbersome, often long and usually end up in liquidation, with asset stripping not uncommon. Reforms have long-since been planned, and it is welcome that new legislation looks finally set to go ahead. The legislation aims at strengthening the role of creditors, speeding up proceedings and allowing composition to play a bigger role. Likewise, efforts to streamline business registration are welcome and should be implemented as soon as possible. The general business climate is also damaged by issues in network industry competition, as some services, notably internet, are expensive in international comparison. Mobility between jobs and regions is weak. Administrative extensions of collective wage agreements, strict employment protection legislation (EPL) on individual dismissals, rent control, severe poverty traps (particularly for families) and a high tax wedge have contributed to considerable long-term unemployment. The Roma population is hit especially hard in this respect. Migration is to some extent mitigating the labour-market rigidities with Slovaks filling skilled vacancies and other eastern Europeans (mainly Ukrainians) taking up unskilled jobs that are unattractive for locals. Tackling the unemployment problem requires measures across a wide front, but most notably social benefit reform is needed along with reduction in the tax wedge as well as easing of EPL. The widespread social and economic exclusion of the Roma needs more attention, particularly in the education system. A more open immigration policy is needed to address immediate issues such as the inconsistency between granting work permits as well as for better alignment of immigrants' skills with those needed on the Czech labour market.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe, Ukraine, and Czech Republic

5322. Competition Law and Policy in the Russian Federation

Publication Date:
11-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
When the Russian Federation began its transition toward a market based economy, promoting competition and regulating anticompetitive behavior - issues never previously needing to be addressed - arose as new and unfamiliar subjects for state policymaking and law enforcement activities. In order to address these issues, the Russian Federation created a competition authority and basic law in 1991, quite early in its transition period. Support for competition was expressed in the 1993 Constitution, as well as in other fundamental legislation. As part of a larger study of regulatory reform, the OECD in 2003 undertook a detailed assessment of Russia fs decade of experience with competition law and policy. The Report concludes that despite early legislation on the issue and strong expressions of support for competition in the laws, the creation and protection of competition on domestic markets has not been a policy priority. Emphasis on rapid privatization limited the scope of pre-privatization restructuring to promote competition and the competition authority has been expected to serve as a general regulator of behavior in markets, assigned to fill legislative gaps and to enforce against a variety of undesirable practices in markets. Overly broad responsibilities and a lack of credible sanctions have significantly limited the impact of the competition laws.
Topic:
International Relations, Economics, and Government
Political Geography:
Russia

5323. Public Sector Modernisation: Governing for Performance

Publication Date:
11-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Performance – improving it and measuring it – has pre-occupied governments for at least half a century. Over the past two decades, public sector performance has taken on special urgency as OECD countries have faced recessions, mounting demands for more and better public services, and, in some countries, citizens increasingly unwilling to pay higher taxes. Accompanying these pressures have been demands for more public accountability.
Topic:
International Relations, Development, Economics, and Government

5324. OECD Territorial Reviews: Mexico City

Publication Date:
10-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Mexico City's spectacular growth into one of the world's largest metropolitan regions is giving way to new development dynamics. The Metropolitan Area of Mexico City (MAMC), with a population of approximately 18.4 million people, is undergoing two main transitions: first, from high population growth to relative demographic stability and spatial redistribution, and second, from a declining manufacturing economy focused on national markets to one based on services competing internationally.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
North America and Mexico

5325. Economic Survey of Canada, 2004

Publication Date:
10-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Economic performance has been solid, and macroeconomic policies are appropriate. The economy is expected to expand by close to 3.5 per cent in 2005, and the output gap will soon be closed. Monetary stimulus should gradually be removed and the fiscal policy stance needs to remain neutral. The Canadian dollar appreciated sharply in 2003 and is now probably not far from its fundamental value. Canadian firms will need to continue to adjust by making efforts to improve productivity to maintain competitiveness. Policy makers should remain focussed on policies that enhance productivity growth across all sectors. With a sound macroeconomic framework and structural policies that are mostly conducive to a well functioning economy, the country is well placed to meet the challenges of an ageing population, namely, maintaining rises in living standards through strong rates of productivity growth and policies to attenuate the expected fall in hours worked on average across the whole population, and ensuring that public finances are sustainable, especially given pressures on health care outlays.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Canada and North America

5326. Economic Survey of Turkey, 2004

Publication Date:
10-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Turkey is at a crossroads. After hitting the most severe crisis of its recent history in 2000-2001, the economy bounced back and is now among the fastest growing economies in the OECD. A new institutional framework for monetary and fiscal policies as well as for product, labour and financial markets, infrastructure industries, and agricultural support opened a window of opportunity to escape from the three traps of low confidence, weak governance and high informality which underpinned the boom and bust cycle of the past and to embark durably on a higher growth path. Success will depend on fully implementing and completing the new policy framework.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Turkey and Eastern Europe

5327. A New World Map in Textiles and Clothing

Publication Date:
10-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The textile and clothing industries provide employment for tens of million of people, primarily in developing countries, and accounted for USD 350 billion in merchandise exports in 2002, or 5.6% of the world total. The current rules governing world trade in textiles and clothing will change drastically at the end of 2004, when countries will no longer be able to protect their own industries by means of quantitative restrictions on imports of textile and clothing products. What will this mean for cotton growers in Burkina Faso and Turkey, fashion retailers in France and the United States, or shirt factories in Bangladesh, the Dominican Republic or China?
Topic:
Civil Society, Development, Economics, and Industrial Policy
Political Geography:
Bangladesh, United States, China, Turkey, and France

5328. Clocking in and Clocking out: Recent Trends in Working Hours

Publication Date:
10-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The amount of time people spend at work is a key element in several economic and social challenges facing industrial countries, notably those associated with population ageing. OECD governments will need to bring more people into the labour force and keep them there in coming years as the ratio of older to younger people rises if they wish to maintain living standards and finance social protection. One way of doing that is to make working time more flexible. For example, part-time jobs can make it easier for mothers with young children to combine working and parenting. More flexible working hours can also help firms adjust to changing workloads.
Topic:
Civil Society, Development, Economics, and Industrial Policy

5329. Farm Household Income: Towards Better Informed Policies

Publication Date:
10-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Improving the income situation of farm households remains a prominent objective of agricultural policies in many OECD countries. Concerns are often expressed in response to year over year declines in national farm income levels or to fluctuating world commodity prices. Increasingly, however, attention is moving away from such partial indicators of household well-being towards a more comprehensive concept of farm household income which encompasses all income sources available to family members as well as their accumulated wealth.
Topic:
Agriculture, Civil Society, Development, and Economics

5330. Economic Survey of Finland, 2004

Publication Date:
10-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The transformation of the Finnish economy over the last decade represents one of the few examples of the "new economy" taking hold in Europe. Output and productivity growth over the second half of the 1990s was among the highest in the OECD, and the recovery from the global downturn has been much stronger than for the euro area as a whole. However, imminent population ageing threatens to expose weaknesses in the labour market. Demographic developments, which over past decades have been broadly neutral, could reduce the growth rate of GDP per capita by 1/4 of a percentage point per annum over the remainder of this decade and by almost 1 percentage point over the next decade. This, combined with the likelihood of smaller productivity gains in the information and communication technology (ICT) sector, a continuation of falling ICT prices as well as the mediocre performance in the sheltered sectors, threatens the future growth of living standards. Within a decade, and in the absence of further policy changes, these developments together could imply that Finland not only loses its top performer status but could face a protracted period of slow growth, as illustrated in the following scenario.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Europe

5331. Private Health Insurance in OECD Countries

Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Health spending in OECD countries averages more than 8% of gross domestic product (GDP) and the share is rising. Overall, some threequarters of that spending is publicly financed. Private health insurance accounts, on average, for only a quarter of private-sector financing, although there is great cross-country variation. In a third of the OECD member countries at least 30% of the population has private health insurance, while market size is negligible in nearly as many countries. Private health insurance also plays a variety of roles, ranging from primary coverage for particular population groups to a supporting role for public systems.
Topic:
Civil Society, Development, Economics, and Human Welfare

5332. Employment Protection: Costs and Benefits of Greater Job Security

Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Deregulating labour markets – for example making it easier for firms to hire and fire employees – is at the heart of the employment debate in many OECD countries. Laws on firing or layoffs and other employment protection regulations are thought by many to be a key factor in generating labour market "rigidity", as well as one reason for the large differences in labour market performance among OECD countries, notably between the United States and some of the larger European countries.
Topic:
Civil Society, Development, Economics, and Government
Political Geography:
Europe

5333. Economic Survey of Portugal, 2004

Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Convergence of the Portuguese economy toward the more advanced OECD economies seems to have halted in recent years, leaving a significant gap in per capita incomes. The proximate cause is low labour productivity, as employment rates across the board are substantially higher than the EU average. Nor is there a shortage of capital goods in aggregate. But capital equipment in the business sector is not always efficiently used or allocated, and new technologies are not readily adopted. Furthermore, the Portuguese labour force – even its younger members – have had less formal education than workers in other EU countries, including among the new entrants from Central and Eastern Europe, and workers in Portugal also have less access to training than in many other countries. Traditional Portuguese low value-added highly labourintensive products now face increasing competition from developing countries and from the new EU entrants.
Topic:
Development, Economics, and Government
Political Geography:
Europe and Eastern Europe

5334. Which Policies Can Reduce the Cost of Capital in Southern Africa?

Author:
Martin Grandes and Nicolas Pinaud
Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Lowering interest rates and, thus, the cost of borrowing in the rand zone (Lesotho, Namibia, Swaziland and South Africa) is a priority to promote investment and economic growth. Local-currency interest rates in these countries are driven by those on rand-denominated transactions. Reducing the level and volatility of the rand premium would help reduce financing costs in the region. Policies should promote: enhancing financial-market liquidity; easier access to South African financial markets for African entities; domestic saving capacity; and the improvement of international perception of the rand. Johannesburg could become a financial "hub" for the region, channelling cheap resources to its neighbours.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
Africa, South Africa, Swaziland, and Namibia

5335. Public Sector Modernisation: Changing Organisational Structures

Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Governments have always changed their structures to respond to new priorities in a changing society, or to improve the management of existing ones. They have also taken advantage of new capacities and better governance in society in general to put some of the functions previously performed in the core public service at arm's length, or even to privatise or contract them out.
Topic:
International Relations, Civil Society, Economics, and Government

5336. The OECD Principles of Corporate Governance

Publication Date:
08-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The integrity of businesses and markets is central to the vitality and stability of our economies. So good corporate governance – the rules and practices that govern the relationship between the managers and shareholders of corporations, as well as stakeholders like employees and creditors – contributes to growth and financial stability by underpinning market confidence, financial market integrity and economic efficiency. Recent corporate scandals have focussed the minds of governments, regulators, companies, investors and the general public on weaknesses in corporate governance systems and the need to address this issue.
Topic:
Development, Economics, Government, and Political Economy

5337. Economic Survey of Germany, 2004

Publication Date:
08-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
With the effects of adverse external shocks diminishing, a strong and competitive export industry is helping the German economy out of a three-year period of near stagnation. Domestic demand has been declining over the last couple of years, as poor labour market performance has weighed on consumer sentiment and business confidence. The labour market still suffers from weak economic growth and distorted incentives, with both contributing to problems in taking up work and providing employment. Productivity growth is not high enough to compensate for the adverse effect of low labour utilization on economic growth. Fiscal targets have been missed on account of both cyclical and structural factors. The government has launched a major reform initiative to reinvigorate economic growth. These reforms are welcome, have to be continued and need to be broadened further to reduce government debt, remove fiscal distortions, and improve incentives to supply and demand labour. Furthermore, there remains considerable scope to foster the creation of new enterprises and widen product market competition, thereby also maintaining the strong innovative capacity of the economy. The major challenges are to link fiscal consolidation to public sector reform and to increase the capacity of the economy to create employment and increase productivity growth. To create confidence and to restore Germany's traditional economic strength it is necessary that reforms reflect a coherent vision about the reorientation of economic policy – combining a growth and stability oriented macroeconomic policy with structural reforms – and are implemented according to a transparent and predictable roadmap.
Topic:
Development, Economics, and Industrial Policy
Political Geography:
Europe and Germany

5338. Public Sector Modernisation: Modernising Public Employment

Publication Date:
07-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
When it comes to the nuts and bolts of government, OECD countries have one thing in common: a core public service. In other words, a centrally controlled bureaucracy made up of people working in ministries, departments and government agencies to carry out the business of government. Civil service structures have evolved around the idea that public employment is different from other types of work and therefore requires a special employment system and structure.
Topic:
Civil Society, Development, Economics, and Government

5339. The Significance of Knowledge Management in the Business Sector

Publication Date:
07-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Knowledge management – how organisations track, measure, share and make use of intangible assets such as an employee's ability to think fast in a crisis – is increasingly important in a fast-changing knowledge society. Organisations have always managed knowledge, even if they did not use the term knowledge management. For example, a person experienced in operating or repairing a particular machine could pass their knowledge on to newcomers.
Topic:
Development, Economics, Education, and Industrial Policy

5340. Economic Survey of the Euro Area, 2004

Publication Date:
07-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The euro area has shown disappointing resilience to shocks and its income gap against the best performing countries remains large and is widening. The differences between individual euro area countries are even more striking and the forces that influence convergence in economic performance across the area are largely the same as those that shape the economic performance of the area.
Topic:
Development, Economics, and International Trade and Finance

5341. Economic Survey of the Russian Federation, 2004

Publication Date:
07-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The major economic challenge facing Russia is the achievement of long-term, sustainable growth that would allow for a relatively rapid convergence between living standards in Russia and the OECD economies. The nature of this challenge is largely determined by Russia\'s economic structure. At present, Russia\'s economy is highly dependent on the export of a limited range of natural resources, chiefly hydrocarbons and metals. This presents policymakers with a number of specific problems. In particular, resource dependence makes the Russian economy especially vulnerable to external shocks. It is therefore difficult to overstate the importance of prudent macroeconomic policies, especially as the budget relies heavily on resource taxes and is thus influenced by volatile energy prices. Hence, exemplary fiscal discipline, in particular, is crucial to reducing Russia\'s vulnerability to commodity-price cycles. Yet while resource dependence brings with it certain macroeconomic risks, economic performance will continue to depend to a great extent on the performance of resource-exporting sectors for the foreseeable future. This makes reform of the natural gas sector an urgent priority. In the absence of substantial reform, the gas industry, which is critical to both exports and the domestic economy, could well stagnate or decline.
Topic:
International Relations, Development, and Economics
Political Geography:
Russia

5342. Access Pricing in Telecommunications

Publication Date:
06-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
OECD countries now have an average of 5-6 years of experience with competition in the telecommunications industry. The liberalisation process has been guided by principles such as minimising barriers to entry and ensuring that new entrants have access to essential services at non-discriminatory terms and conditions. Experience has now shown that the conventional understanding of these principles needs to be refined in order to ensure the on-going, long-term development of competition in the industry.
Topic:
Development, Economics, Industrial Policy, and Science and Technology

5343. Economic Survey of Poland, 2004

Publication Date:
06-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Poland has made impressive progress in the transformation of its economy and the accession to the European Union on 1st May 2004 marks another historical event. It follows 15 years of profound change and accomplishment. More than 75 per cent of GDP is now produced in the private sector, the economy is well integrated with those of western European nations and inflation has been brought down to low levels. After an initial fall, output has been growing continuously for more than 10 years and, on average, Poles are much better off now than they were then. However, the striking drop in employment since 1998 is suggestive of serious remaining problems. To address these, much more needs to be done, notably in terms of raising productivity, expanding employment and increasing per capita income, which is 41 per cent of OECD levels.
Topic:
Development and Economics
Political Geography:
Europe and Poland

5344. Agricultural Support: How is it Measured and What does it Mean?

Publication Date:
06-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
OECD governments have a long history of pursuing agricultural policies, with objectives ranging from supporting farm incomes to securing safe food and environmental quality. Policy measures are equally varied, including instruments such as import tariffs, export subsidies and a host of different government payments to farmers. Many of these policies share the common feature that they transfer money to farmers, and thereby impact on production decisions, incomes, international trade and the environment.
Topic:
Agriculture, Development, Economics, and Environment

5345. Economic survey of Korea, 2004

Publication Date:
06-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Korea has been one of the fastest growing economies in the OECD area over the past five years, with an annual growth rate of about 6 per cent. Such rapid growth, which has lifted per capita income to two-thirds of the OECD average, reflects Korea's underlying dynamism and its progress in implementing a wide-ranging reform programme in the wake of the 1997 crisis. However, the recession in 2003 – which was due in part to structural problems in the labour market and in the corporate and financial sectors – indicates that the reform agenda is unfinished. Sustaining rapid growth over the medium term as the contribution from inputs of labour and capital slows requires further progress in structural reform, particularly in the labour market and in the corporate and financial sectors, accompanied by appropriate macroeconomic policies.
Topic:
Development, Economics, and Government
Political Geography:
Asia and Korea

5346. Competition Law and Policy in Mexico

Publication Date:
06-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Mexico's competition policy was introduced as part of a decade-long reform initiative, begun in the mid-1980s, to end central government control and protection of domestic economic activity and to develop instead a market-based economy. A key element in the government's economic reform was the adoption, in 1993, of the Federal Law of Economic Competition (LFCE), and creation of the Federal Competition Commission (CFC) to enforce it.
Topic:
Development, Economics, and Government
Political Geography:
North America and Mexico

5347. Keeping Children Safe in Traffic

Publication Date:
05-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Road accidents are the number one killer of children in OECD countries. An estimated 100,000 children have died on the roads in the past 20 years – almost 100 per week on average. Of course, this level of fatalities is not acceptable. Road transport safety, particularly for children, should be a priority for all governments.
Topic:
Agriculture, Economics, Environment, Human Rights, International Organization, and Political Economy

5348. Economic Survey of the Netherlands, 2004

Publication Date:
05-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The economic downturn in the Netherlands, like the boom that preceded it, has been more marked than in most other European countries. This is partly attributable to greater exposure to international trade, especially with the US, and to greater sensitivity to international stock price movements. But there are also some structural policies – pension fund regulation, housing and wage setting institutions – that have undermined economic efficiency and contributed to the amplitude of the cycle. Furthermore there has been a marked deterioration in public finances, part of which is structural. Longer term growth trends too are unfavourable. In view of these developments, the main challenges are to reform those policies that have reduced efficiency and increased volatility, put public finances on a sustainable path, and, most importantly, increase trend growth by increasing both employment and productivity.
Topic:
Agriculture, Economics, Environment, Human Rights, International Organization, and Political Economy
Political Geography:
Europe and Netherlands

5349. Mobilising Public Opinion Against Global Poverty

Author:
Jude Fransman and Henri-Bernard Solignac Lecomte
Publication Date:
05-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Citizens in OECD countries quite unambiguously support more solidarity and justice at the international level; however, despite the adoption of the Millenium Development Goals (MDGs) by their governments in 2000, they remain insufficiently informed and educated about global development challenges. With increased understanding of the issues, citizens could provide greater support for more efficient and coherent development policies as well as for more funding. This requires new efforts by national authorities to report on desirable outcomes and on the results and effectiveness of international development policies towards achieving them.
Topic:
Agriculture, Economics, Environment, Human Rights, International Organization, and Political Economy

5350. Security System Reform and Governance:Policy and Good Practice

Publication Date:
05-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Security in all its dimensions is fundamental to reducing poverty, protecting human rights and achieving the Millennium DevelopmentGoals (MDGs). Security concerns not only the stability of the state and the security of regimes. It also involves the safety, well-being and freedom from fear of a nation and its people.
Topic:
Agriculture, Economics, Environment, Human Rights, International Organization, and Political Economy