arbitrage boundaries treasury bills and covered interest parity abstract this paper uses the covered interest parity relationship to define upper and lower arbitrage boundaries on domestic treasury bill t bill rates adapting the methodology for estimating frontier functions empirical tests are specified to determine whether the arbitrage boundaries provide a binding constraint on the behavior of the domestic t bill rate empirical evidence is presented for the covered canadian t bill rate which indicates that at various times the us t bill rate has been a binding lower boundary and the euro us ollar deposit rate has provided a binding upper boundary

interest rate expectations and interest parity abstract this paper examines an hypothesis for explaining divergences from interest parity that is based on interest rate expectations if interest rates are expected to rise significantly within the arbitrage oppurtunity implies riskless profit waiting in ths way has been noted in the historical literature seems to make sense theoritically if portfolio adjusment cost in the capital market outweigh any costs of being out of long term equilibrium and explains a significant portion of us uk interest parity divergences using onshore assets in a recent floating preiod

a note on interest parity and the supply of arbitrage funds the divergence of the actual forward premium on foreign exchange from that dictated by the principle of interest rate parity can arise from two separately identifiable causes 1 an equilibrium position as indicated by the interest parity principle has not been reached or 2 that the principle itself is not a correctly specified equilibrium condition it is the purpose of this note to offer a revised specification of the interest parity condition and to determine whether this version approximates more closely the actual premium as determined in the market it should be made clear however that this is a partial analysis and does not deal with the impact of other forces for example speculation on the forward premium as a result a complete model of the spot and forward markets for foreign exchange such as stein s 1965 is not attempted here in general the principle of interest parity maintains that in equilibrium

poverty comparisons over time and across countries in africa abstract we use demographic and health surveys dhs to compare poverty at two or more points in time within and between african countries our welfare measure is an index resulting from a factor analysis of various household characteristics durables and household heads education an advantage of this measure is that for intertemporal and intraregional comparisons we need not rely on suspect price deflators and currency conversion factors the wide availability and similarity of questionnaires of the dhs facilitate comparisons over both time and countries our results generally show declines in poverty during the previous decade largely due to improvements in rural areas

material use and material efficiency in latin america and the caribbean different world regions have followed very different trajectories for natural resources use over the recent decades latin america has pursued a development path based largely on exports of primary resources adopting this path has characteristic environmental and social impacts in this paper we provide the first broad based estimate of material use and material efficiency for the region beginning in 1970 and extending to the onset of the global financial crisis in 2008 the results show a region with rapidly growing primary materials consumption which is simultaneously becoming less efficient at converting those resources into national income using an ipat framework we found that population growth and rising per capita incomes made comparable contributions to growing material use while technological change as reflected in material intensity did not moderate consumption increasing materials intensity observed for the region as a whole is also observed for most individual countries this contrasts with some other world regions and implies that many countries in latin america and the caribbean will confront higher environmental pressures than expected when expanding their extractive industries to take advantage of new demand from other world regions while simultaneously supplying the requirements for their own domestic industrial transformations and urbanization

the economics of poverty traps and persistent poverty an asset based approach abstract longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty while a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty this paper develops an asset based approach to poverty analysis that makes it possible to distinguish deep rooted persistent structural poverty from poverty that passes naturally with time due to systemic growth processes drawing on the economic theory of poverty traps and bifurcated accumulation strategies this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long term persistent structural poverty as well as relevant extensions of the popular foster greer thorbecke class of poverty measures the paper closes with reflections on how asset based poverty can be used to underwrite the design of persistent poverty reduction strategies

the stability of the interest parity relationship between canada and the united states a note where f and s are respectively the forward and spot prices of foreign exchange and r the domestic foreign interest rate empirically however condition 1 does not always appear to have been satisfied thus raising questions regarding the existence of unexploited profit opportunities in the foreign exchange market previous studies have attempted to offer explanations for these apparent deviations from interest parity for example prachowny 1970 emphasized the role of capital market imperfections aliber 1973 stressed measurement error and political risk while branson 1969 and later frenkel and levich 1975 argued that departures from interest parity were due to transactions costs in canada three of these factors have with perhaps varying degree had some influence on developments in financial markets during the 1970s first as evidence of capital market imperfections there was the winnipeg agreement between the bank of canada and the chartered banks which imposed ceilings on large canadian dollar short term bank deposits second there was the potential for an increase in the political riskiness of canadian dollar denominated assets following the election of the separatist government in quebec in late 1976 finally there was the market turbulence accompanying the sharp depreciation of the canadian dollar during 1977 and 1978 and its potential for increased transactions costs in the market for foreign exchange resulting from greater uncertainty regarding exchange rate movements but how important have these factors been as far as the robustness of the interest parity theorem is concerned indeed have variations in the degree of capital market imperfection in political risk or in transactions costs been sufficient to cause statistically significant breakdowns in the basic relationship given by equation 1 this note attempts to throw some light on this question by testing for the stability of the parameters in the regression relationship

welfare dynamics in rural kenya and madagascar this paper presents comparative qualitative and quantitative evidence from rural kenya and madagascar in an attempt to untangle the causality behind persistent poverty we find striking differences in welfare dynamics depending on whether one uses total income including stochastic terms and inevitable measurement error or the predictable structural component of income based on a household s asset holdings our results suggest the existence of multiple dynamic asset and structural income equilibria consistent with the poverty traps hypothesis furthermore we find supporting evidence of locally increasing returns to assets and of risk management behaviour consistent with poor households defence of a critical asset threshold through asset smoothing

the statistical distribution of exchange rates empirical evidence and economic implications the abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non normal distributions including the student the stable paretian and mixtures of distributions this paper compares the empirical fits of three non normal candidates and the normal distribution for daily changes in the logarithms of exchange rates using maximum likelihood estimation of the parameters and chi square goodness of fit tests the student and mixture of two normals provide the best fits but there is evidence that the distribution parameters may vary over time

covered interest arbitrage in the 1970 s abstract this paper provides an empirical overview on covered interest arbitrage during the flexible exchange rate regime of the 1970 s it estimates the cost of transactions in foreign exchange and security markets and shows that these costs account for most of the deviations from parity

the economics of poverty traps and persistent poverty empirical and policy implications the moral and economic imperatives to intervene in poverty traps motivate the identification of poverty traps and their structural causes so as to inform the design of appropriate policy responses however empirical identification remains challenging because of poverty traps complexity after reviewing mechanisms that can generate poverty traps we focus on one multiple financial market failures emphasising its heretofore underappreciated testable implications including specific behaviours that are rational only in the presence of a poverty trap we therefore recommend tests for these behaviours rather than more econometrically challenged efforts to directly test for poverty traps in estimated asset dynamics

welfare outcomes and the advance of the deforestation frontier in the brazilian amazon summary frontier expansion in the brazilian amazon is often described as boom bust development we critically assess this characterization by mapping and estimating statistical models of welfare as a function of deforestation at the municipal level after controlling for potential confounding variables and spatial autocorrelation estimation results are consistent with a frontier boom generated by exploitation of natural resources followed by a bust during which forests continue to fall but there is no compensating gain in welfare however average per capita welfare increases again with deforestation at very high levels this second turning point in average welfare along with the strong bivariate correlation between deforestation and municipal gdp km2 may encourage local leaders to equate deforestation with development this confirms the need for international incentive payments for global public goods such as biodiversity and carbon sequestration that are provided by the amazon forest

economic shocks diversification and forest use in uganda we investigate household outcomes arising from economic shocks in rural uganda focusing on patterns of income diversification and forest use and the role of assets in shaping ex post response to shocks income poor households and those with below average landholdings are observed to have more diversified income portfolios than their cohorts households encountering above average losses tend to have more diversified income portfolios subsequent to the losses larger negative shocks are associated with greater use of the forest in subsequent periods especially among asset poor households findings suggest that development of better safety nets would reduce both vulnerability and forest pressure

environmental income and rural livelihoods a global comparative analysis this paper presents results from a comparative analysis of environmental income from approximately 8000 households in 24 developing countries collected by research partners in cifor s poverty environment network pen environmental income accounts for 28 of total household income 77 of which comes from natural forests environmental income shares are higher for low income households but differences across income quintiles are less pronounced than previously thought the poor rely more heavily on subsistence products such as wood fuels and wild foods and on products harvested from natural areas other than forests in absolute terms environmental income is approximately five times higher in the highest income quintile compared to the two lowest quintiles

the material basis of the global economy worldwide patterns of natural resource extraction and their implications for sustainable resource use policies abstract material flow accounting and analysis mfa has been established as an influential framework for quantifying the use of natural resources by modern societies so far however no reference data for overall scale and trends of global extraction of natural resources and their distribution between different world regions has been available this paper presents the first comprehensive quantification of the material basis of the global economy i e used domestic extraction in a time series from 1980 to 2002 we analyse time trends for major material groups fossil fuels metals industrial and construction minerals and biomass disaggregated into seven world regions this allows for a an illustration of the global economy s physical growth driven by worldwide processes of economic integration over the past decades and b an indication of the worldwide distribution of environmental pressures associated with material extraction the results show that annual resource consumption of the world economy increased by about one third between 1980 and 2002 this indicates that scale effects due to economic growth more than compensated for other effects such as the relative increase of the service sectors contribution to gdp structural effect and the use of new production technologies with higher material and energy efficiency technology effect the observed growth of natural resource extraction is unevenly distributed over the main material categories with metals showing the highest growth rate the regional analysis shows the increasing importance of asia and latin america in global resource extraction on the global level material intensity i e resource extraction per unit of gdp decreased by about 25 indicating relative decoupling of resource extraction from economic growth the paper concludes with policy recommendations for a more sustainable use of natural resources

forest clearing livelihood strategies and welfare evidence from the tsimane in bolivia this study analyzes the relationship between forest households livelihood strategies and forest clearing and the relationship of both to welfare the analysis relies on a rich panel dataset collected on the tsimane communities in bolivia to highlight how forest households combine sales and wage activities forest clearing is associated with all livelihood strategies but the association with welfare differs depending on the strategy pursued households that clear more and that generate their earnings by combining agricultural sales and wage activities are better off judged in terms of assets than those undertaking other strategies by contrast households in a subsistence strategy are not able to accumulate assets in the long run overall households clear only small areas of forest which has a positive effect on welfare and enables accumulation of assets

poverty alleviation and tropical forests what scope for synergies abstract this paper explores the state of the art of the two way causal links between poverty alleviation and natural tropical forests microimpacts of rising poverty can increase or slow forest loss at the macrolevel poverty also has an ambiguous effect but it is probable that higher income stimulates forest loss by raising demand for agricultural land the second question is what potential forest led development has to alleviate a country s poverty in terms of producer benefits consumer benefits and economy wide employment natural forests widely serve as safety nets for the rural poor but it proves difficult to raise producer benefits significantly urban consumer benefits from forest an important target for pro poor agricultural innovation are limited and seldom favor the poor absorption of poor unskilled labor is low in forestry which tends to be capital intensive natural forests may thus lack comparative advantage for poverty alleviation there are few win win synergies between natural forests and national poverty reduction which may help to explain why the loss of tropical forests is ongoing this may have important implications for our understanding of sustainable forest development and for the design of both conservation and poverty alleviation strategies

transactions costs and covered interest arbitrage theory and evidence the extent to which deviations from covered interest parity can be attributed to transactions costs has been exaggerated in the economic literature because the swap market in foreign exchange has been ignored it is shown that such deviations should be no greater than the lowest of the transactions costs in one of three markets the swap market or either of the two relevant securities markets this reconciles the theory with the data which show spreads of no more than a few basis points however the empirical results have no direct bearing on the conventional market efficiency hypothesis

how strong is the evidence for the existence of poverty traps a multicountry assessment introducing this special collection on asset dynamics and poverty traps this article assesses evidence on these issues across eight panel data sets in six countries generally not previously considered in this perspective it examines the importance of assets in relation to chronic poverty and uses parametric and non parametric methods to test for dynamic asset based poverty traps the article finds that chronically poor households have lower levels of assets than others though does not find evidence of the non convexities which would imply a multiple dynamic poverty trap from this base the article introduces the remainder of the articles in this collection which set out many promising approaches to further develop and improve methods and approaches for looking at poverty traps in future

stochastic wealth dynamics and risk management among a poor population we use herd history data collected among pastoralists in southern ethiopia to study stochastic wealth dynamics among a poor population although covariate rainfall shocks plainly matter household specific factors including own herd size account for most observed variability in wealth dynamics we find no support for the tragedy of the commons hypothesis past studies may have conflated costly self insurance with stocking rate externalities biophysical shocks move households between multiple dynamic wealth equilibria the lowest suggesting a poverty trap according to nonconvex path dynamics these findings have broad implications for development and relief strategies among a poor population vulnerable to climatic shocks a vast economic literature on risk management rests explicitly or implicitly on the classic friedmanite permanent income hypothesis studies of portfolio management consumption smoothing social insurance and the like all depend on the canonical assumption that stochastic income realisations are drawn from a stationary income distribution leading to consumption smoothing off a stable asset base the possibility of asset accumulation connects this literature to the immense literature on the theory and empirics of economic growth

impact of green control techniques on family farms welfare abstract using survey data of 375 family farms in five provinces of the huang huai hai plain this paper conducts a comprehensive measurement of family farms welfare within the framework of the capability approach theory furthermore using an endogenous switching regression model and a multinomial treatment effects model this paper evaluates the impact of the adoption or non adoption of green control techniques on family farms welfare and estimate the welfare effects of the degree and timing of adoption this research finds that the average treatment effect on family farm welfare with and without adopting green control techniques is significant at 0 084 and 0 046 respectively therefore green control techniques help to improve the welfare level of family farms compared with family farms that do not adopt green control techniques the welfare level of family farms adopting a high or low degree of green control techniques increases by 22 63 and 16 42 respectively and the welfare level of family farms given the early or late adoption of green control techniques increases by 5 87 and 7 57 respectively therefore the welfare effect of a high degree of adoption on family farms is greater and the welfare level of family farms with late adoption is higher