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3301. Contagion: An Empirical Test

Author:
Jon Wongswan
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Using the conditional Capital Asset Pricing Model (CAPM), this paper tests for the existence and pattern of contagion and capital market integration in global equity markets. Contagion is defined as significant excess conditional correlation among different countries' asset returns above what could be explained by economic fundamentals (systematic risks). Capital market integration is defined as the situation in which only systematic risks are priced. The paper uses a panel of sixteen countries, divided into three blocs: Asia, Latin America, and Germany-U.K.-U.S., for the period from 1990 through 1999. The results show evidence of contagion and capital market integration. In addition, contagion is found to be a regional phenomenon.
Topic:
International Relations, Economics, Globalization, and International Trade and Finance
Political Geography:
United States, United Kingdom, Asia, Germany, and Latin America

3302. The USA and UNESCO: Building Knowledge, Building Cultures

Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The United Nations Educational, Scientific and Cultural Organization, UNESCO, was founded after World War II to contribute to peace and security. Collaboration among nations through education, science and culture remains a cornerstone of a peaceful world order. The founders of UNESCO believed that the rule of law, respect for human rights, and freedom of expression would be strengthened through international cooperation. The need for the world community to renew its efforts to advance these principles has never been more urgent. American leadership in the service of peace and security can help mobilize multilateral institutions, including UNESCO, to stand up for common values that promote tolerance and thwart terrorism. The sanctity of human life must be a common commitment.
Topic:
International Relations, Treaties and Agreements, and United Nations
Political Geography:
United States

3303. News or Noise? An Analysis of Brazilian GDP Announcements

Author:
Rebeca de la Rocque Palis, Roberto Luis Olinto Ramos, and Patrice Robitaille
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Revisions to GDP announcements in many countries are often large, and Faust, Rogers, and Wright (2003) have found that G-7 GDP revisions are predictable to varying degrees. In this paper, we extend FRW to study revisions to Brazilian GDP announcements. We document that revisions to Brazilian GDP are large relative to those of G-7 countries. Brazilian GDP revisions are also predictable, which is consistent with the view that GDP revisions correct errors in preliminary GDP rather than reflect news. However, GDP revisions are far from being entirely predictable. Although GDP revisions are largest only one year following the initial GDP release, those revisions are nearly unpredictable.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
Brazil and South America

3304. The Effect of Exchange Rate Fluctuations on Multinationals' Returns

Author:
Jane Ihrig and David Prior
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
<p>This paper examines if the type of exchange rate used or size of the movement in the exchange rate matters in estimating exchange-rate exposure of U.S. nonfinancial multinationals. We find that switching from a broad trade-weighted exchange rate to a 2-digit SIC industry exchange rate increases the number of significantly exposed firms in a simple Jorion (1990) regression by 60 percent. Then separating crisis from non-crisis months we find additional evidence of exposure. Although the value of exposure does not change with the size of the exchange rate movement, we find some firms have significant exposure only in crisis periods while others have significant exposure only during normal fluctuations in exchange rates. All told, we find about 1 in 4 firms' returns is significantly affected by movement in the exchange rate between 1995 and 1999. </p><blockquote><p> </p> </blockquote><p> </p><p> </p>
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

3305. SARS: Down But Still a Threat

Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This Intelligence Community Assessment (ICA) was requested by Secretary of Health and Human Services Tommy Thompson and Ambassador Jack Chow, Deputy Assistant Secretary of State for International Health Affairs. It highlights the evolution of Severe Acute Respiratory Syndrome (SARS) and the potential implications of the disease for the United States under several scenarios; this paper does not attempt to provide a scientific assessment of the epidemiology of SARS. Even though SARS has infected and killed far fewer people than other common infectious diseases such as influenza, malaria, tuberculosis, and HIV/AIDS, it has had a disproportionately large economic and political impact because it spread in areas with broad international commercial links and received intense media attention as a mysterious new illness that seemed able to go anywhere and hit anyone.
Topic:
International Relations, Human Welfare, Poverty, and Third World
Political Geography:
United States

3306. Strategic Reactions to American Preeminence: Great Power Politics in the Age of Unipolarity

Author:
John G. Ikenberry
Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
American global power – military, economic, technological, cultural, and political – is one of the great realities of our age. Never before has one country been so powerful and unrivaled. The United States began the 1990s as the world's only superpower and its advantages continued to grow through the decade. After the Cold War, the United States reduced its military spending at a slower rate than other countries and its economy grew at a faster pace. The globalization of the world economy has reinforced American economic and political dominance. No ideological challengers are in site. More recently, in response to terrorist attacks, the United States has embarked on a massive military buildup. In the recent National Security Strategy, the Bush administration has articulated an ambitious and provocative global military role for the United States in confronting new-age threats. Overall, American power advantages are multidimensional, unprecedented, and unlikely to disappear any time soon. The world has taken notice of these developments. Indeed, the post-Cold War rise of American power -- what might be called the rise of American "unipolarity" -- has unsettled world politics. Governments everywhere are worried about the uncertainties and insecurities that appear to flow from such extreme and unprecedented disparities of power. The shifting global security environment – triggered by the terrorist attacks of September 11th –also has conspired to upset old relationships and expectations. The American invasions of Afghanistan and Iraq have put American power on display and raised far-reaching questions about the use of force, alliances, weapons of mass destruction, sovereignty and interventionism. The world is in the midst of a great geopolitical adjustment process. Governments are trying to figure out how an American-centered unipolar order will operate. How will the United States use its power? Will a unipolar world be built around rules and institutions or the unilateral exercise of American power? This global worry about how a unipolar world will operate – in which the most basic questions about the character of world politics are at stake, namely, who benefits and who commands – is the not-so-hidden subtext of all the recent controversies in America's relations with the rest of the world. The question posed in this report is: how are the major countries around the world responding to American global preeminence? Overall, strategies and policies are mostly still in flux around the world. Responses up to now have been mostly ad hoc. Governments are learning, adapting, negotiating, and reacting – thus it is not possible to identify fixed "strategies of response." This report seeks to help us understand these evolving responses in two ways: first, it will provide conceptual tools to identify and track strategic responses by major states to American preeminence, and second, it will offer some preliminary characterizations of the patterns of response, particularly by Western Europe, Russia, and China. This report might be seen as a sort of "field guide" to global reactions rather than a definitive theoretical and empirical statement on the subject. I begin by offering a summary of the findings. After this, I look at the rise of American unipolar power and the variety of ways that American power is "experienced" around the world. In the next section, I survey the deeper sources and multifaceted character of American unipolar power. Next I explore the limits of the basic strategies of response to concentrated power – balancing, bandwagoning and binding. In the next section, I explore some of the emerging strategies that are appearing among the major countries. Finally, in the conclusion I return to the issue of unipolar power and rule-based order.
Topic:
International Relations, Politics, and Sovereignty
Political Geography:
United States and America

3307. Report of the Defense Science Board Task Force on Discriminate Use of Force

Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In the terms of reference, the Under Secretary of Defense for Acquisition, Technology, and Logistics directed the task force “to conduct a comprehensive study of the ends and means of precision compellence, or the nuanced use of force, in concert with coalition partners, to achieve political, economic and moral change in countries affecting US interests.” Real-world events have since underscored the need for such a study; indeed, the U.S. military applied key elements of a measured, nuanced approach in both the Afghanistan and Iraq campaigns. We are pleased to note this evolution in operations and a parallel evolution in the thinking of the combatant commands and Services. Because of this evolution, it is no longer as necessary as it once was to sell the fundamental objectives of what we term here the discriminate use of force (DUF).
Topic:
International Relations, Defense Policy, and Science and Technology
Political Geography:
United States

3308. Afghanistan: Seeds of Hope

Author:
David Johnson
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In 2000, an overwhelming 97 percent of Afghan girls did not attend school, and today only about 20 percent are literate. Tens of thousands of Afghan girls are now attending school for the first time in years.
Topic:
International Relations, Democratization, and Development
Political Geography:
Afghanistan and Middle East

3309. An Empirical Analysis of Inflation in OECD Countries

Author:
Jaime Marquez and Jane Ihrig
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
One of the most remarkable macroeconomic developments of the past decade has been the widespread decline in inflation despite declines in unemployment rates. For the United States, these seemingly contradictory developments have been reconciled in terms of three factors: (1) an acceleration in productivity, (2) structural changes in labor markets that lowered the natural unemployment rate (NAIRU), and (3) improved credibility of monetary policy. Here we ask whether comparable factors were at work in foreign industrial countries. To address this question, we empirically characterize the relationship between inflation, the unemployment rate, and structural factors using an extended Phillips curve model with quarterly data through 1994. By undertaking counterfactual simulations from 1995 to 2001, we quantify the separate contributions of unemployment-rate movements, labor-market reforms (that affected the NAIRU), and productivity developments on inflation. In line with previous work on the United States, we find that productivity advancements were the main structural factor reducing inflation in the United States. For foreign countries, persistent labor-market slack was the main factor exerting downward pressure on inflation. This persistence stemmed, in part, from structural reforms that lowered the NAIRU while the unemployment rate was declining.
Topic:
International Relations, Development, Economics, and International Trade and Finance
Political Geography:
United States

3310. Putting 'M' Back in Monetary Policy

Author:
Eric M. Leeper and Jennifer E. Roush
Publication Date:
04-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Money demand and the stock of money have all but disappeared from monetary policy analyses. Remarkably, it is more common for empirical work on monetary policy to include commodity prices than to include money. This paper establishes and explores the empirical fact that whether money enters a model and how it enters matters for inferences about policy impacts. The way money is modeled significantly changes the size of output and inflation effects and the degree of inertia that inflation exhibits following a policy shock. We offer a simple and conventional economic interpretation of these empirical facts.
Topic:
Conflict Resolution, International Relations, Economics, and International Trade and Finance