optimal admission and scholarship decisions choosing customized marketing offers to attract a desirable mix of customers each year in the postsecondary education industry schools offer admission to nearly 3 million new students and scholarships totaling nearly 100 billion this is a large understudied targeted marketing and price discrimination problem this problem falls into a broader class of configuration utility problems cups which typically require an approach tailored to exploit the particular setting this paper provides such an approach for the admission and scholarship decisions problem the approach accounts for the key distinguishing feature of this industry schools value the average features of the matriculating students such as percent female percent from different regions of the world average test scores and average grade point average thus as in any cup the value of one object i e student cannot be separated from the composition of all of the objects other students in the enrolling class this goal of achieving a class with a desirable set of average characteristics greatly complicates the optimization problem and does not allow the application of standard approaches we develop a new approach that solves this more complex optimization problem using an empirical system to estimate each student s choice and the focal school s utility function we test the approach in a field study of an mba scholarship process and implement adjusted scholarship decisions using a holdout sample we provide evidence that the methodology can lead to improvements over current management decisions finally by comparing our solution to what management would do on its own we provide insight into how to improve management decisions in this setting

the welfare effects of balance of payments reform a macro micro simulation of the cost of rent seeking this article proposes a methodology for analysing the effect of balance of payments liberalisation on measures of poverty and distribution and applies it to the case of jamaica in the 1990s the methodology consists of a macro micro simulation in which a cge model provides labour market outcomes which in turn are used to manipulate the sectoral allocation of employment to generate the income distribution consistent with the new labour market outcome in the application to jamaica we find that the reallocation of resources away from rent seeking activities in the presence of exchange controls is significant and has large macroeconomic effects opening up of the current account has little effect on poverty but liberalisation of the capital account reduces poverty especially amongst the very poor neither policy change taken separately nor the combination of the two has more than a negligible effect on the distribution of income

international financial contagion in currency crises abstract this paper examines the role of financial linkages especially through a common creditor in the propagation of emerging market crises during the 1990s using panel probit regressions on 41 emerging market countries it finds that financial linkages played a significant role in the spread of the mexican asian and russian crises the significance of financial linkages emerges after controlling for the role of domestic and external fundamentals trade spillovers and financial weaknesses in the affected countries a strong financial linkage to the crisis country of origin not only substantially raises the probability of contagion but also helps to explain the observed regional concentration of currency crises

the distributional effects of imf programs a cross country analysis abstract this paper measures the effects of 58 international monetary fund programs during 1975 91 on gini coefficients and income of the poorest quintile these variables are traced over the two to five years following program initiation this research also presents a new technique to control for differences in countries initial economic circumstances the study finds evidence of a significant deterioration in income distribution and the incomes of the poor in fund program countries relative to their nonprogram counterparts when pre program external imbalance is severe in cases where prior external imbalance is not as great countries participating in fund programs actually show relative improvements in distributional indicators

the influence of elections on imf programme interruptions using panel data for 104 countries between 1975 and 1998 this article tries to explain interruptions of imf programmes around election dates in the recipient countries on average programmes seem to be more likely to break down before elections this increase in interruption probabilities is however less severe in more democratic countries in true democracies interruption frequencies are even lower prior to elections while no other political variables than elections and democracy were found to influence compliance systematically programme interruptions are significantly more likely in countries with high government consumption high levels of short term debt and low gdp per capita at programme initiation

international financial crises causes prevention and cures dale jorgenson has bestowed a great honor and no small challenge by inviting me to give this lecture a great honor because of the distinguished list of economists who have preceded me a challenge because of the standard they have set and because there is no greater challenge for any economist than providing a coherent account of significant events to his scientific peers i am sometimes asked by friends about the differences between academic life and life as a public official there are many two stand out first as an academic the gravest sin one can commit is to sign one s name to something one did not write as a public official it is a mark of effectiveness to do so as often as possible second as an academic if a problem is too hard and does not admit of a satisfactory solution there is an obvious response work on a different problem that is not a luxury that one has in government i have been reminded of this often in recent years as we have grappled with financial crises in a number of what had previously been considered emerging markets with unrestrained futures anyone who doubts the social importance of what economists do should consider the debates surrounding these crises hundreds of millions of people who expected rapidly rising standards of living have seen their living standards fall hundreds of thousands if not millions of children have been forced to drop out of school and go to work hundreds of billions of dollars of apparent wealth has been lost the stability of large nations as nations has been called into question and the united states has made its largest nonmilitary foreign policyrelated financial commitments since the marshall plan almost all the issues involved in understanding preventing and mitigating these crises are the stuff of economics courses and research fixed versus flexible exchange rates moral hazard and multiple equilibria speculation and liquidity fiscal and monetary policies regulation and competition what economists think say and do has profound implications for the lives of literally billions of their fellow citizens whether it is discussing the role of derivatives in signaling exchange rate commitments with chinese premier zhu rongji or discussing an nber working paper on inflation targeting with the brazilian central bank governor arminio fraga or discussing alternative approaches to bankruptcy law with indonesia s economic team or optimal debt durations with the mexican authorities i am consistently struck by the impact of the kind of research discussed at the aea meetings the future well being of the world s people in large part will depend on how the ongoing process of global integration works out this is a strong statement but one that is supported by the global economy s post world war i failure and its post world war ii success central to global integration is financial integration the flow of funds and of capital across international borders and as the events of the late 1920 s and early 1930 s remind us central to global disintegration can be international financial breakdowns today i want to reflect on the issue of global financial integration in light of the dramatic and largely unpredicted events of recent years it is perhaps a good time for reflection there has been enough repair that priority can shift from u s department of the treasury 1500 pennsylvania avenue washington dc 20005 this lecture reflects many things i have learned from experiences i have shared with colleagues in the united states government and governments around the world i thank brad delong marty feldstein stephanie flanders ken rogoff andrei shleifer and ted truman for useful comments and suggestions i am especially grateful to nouriel roubini and stephanie flanders for valuable discussions and assistance in the preparation of this lecture the usual disclaimer applies

the effect of imf programs on economic growth abstract using a bivariate dynamic version of the heckman selection model we estimate the effect of participation in international monetary fund imf programs on economic growth we find evidence that governments enter into agreements with the imf under the pressures of a foreign reserves crisis but they also bring in the fund to shield themselves from the political costs of adjustment policies program participation lowers growth rates for as long as countries remain under a program once countries leave the program they grow faster than if they had remained but not faster than they would have without participation

on the optimal product line selection problem with price discrimination product line design decisions are determinant for a firm s market success and simultaneously very costly to implement and change to evaluate the profitability of a design a number of mathematical programming approaches have been proposed in the last three decades typically nonlinear integer optimization problems that can only be tackled heuristically for real world instances recently chen and hausman 2000 efficiently exploited the fractional programming properties of a stylized model for product line and price selection with the objective to maximize contribution given homogeneous customer behavior by an aggregate multinomial logit choice model we extend the approach of chen and hausman chen k d w h hausman 2000 technical note mathematical properties of the optimal product line selection problem using choice based conjoint analysis management sci 46 2 327 332 to determine an optimal product line under a personalized or group pricing strategy in markets with multiple heterogeneous consumers such that total profit including fixed costs is maximized personalized group pricing is a growing discrimination strategy that more and more businesses are realizing is not only very profitable but also often implementable in the era of e business our problem formulation allows to incorporate commonly applied attraction choice models including the multinomial logit the bradley terry luce and approximately the first choice model though the problem is generally nonlinear we show that the fractional substructure resulting from attraction choice models can still be exploited to globally solve real world instances in reasonable time

currency crashes in emerging markets an empirical treatment we use a panel of annual data for over 100 developing countries from 1971 through 1992 to characterize currency crashes we define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation we examine the composition of the debt as well as its level and a variety of other macroeconomic factors external and foreign crashes tend to occur when output growth is low the growth of domestic credit is high and the level of foreign interest rates are high a low ratio of fdi to debt is consistently associated with a high likelihood of a crash

the revolving door duration and recidivism in imf programs quarterly evidence on participation in imf programs for the period 1974 2003 is examined statistically using the techniques of hazard analysis and error correction estimation three hypotheses are proposed and tested and the results support a revolving door explanation of participation in imf programs first an increase in cumulative prior participation in imf programs is found to cause a reduction on average in the length of a new spell of participation second the length of time between participation spells is reduced significantly with an increase in cumulative prior participation in imf programs third the evolution of reserve adequacy is shown to be significantly and positively affected by participation in imf programs the results depict a revolving door to imf participation and for those countries with prior participation the door revolves more rapidly this result is shown to depend critically upon the mix of countries considered the increase in recidivism is a phenomenon most strongly observed among the least developed countries while the reduction in duration is more strongly observed in the emerging and transition economies these results are derived while controlling for country specific unobserved heterogeneity year specific demand effects external shocks and pre existing policy distortions

does the imf perform a catalytic role the imf advertises itself as playing a catalytic role whereby its lending programmes induce other providers of finance to invest or lend as well the theoretical foundations of this claim are reviewed and found to be questionable the empirical evidence also appears to contradict the notion of a consistent and significant catalytic effect the policy implications of weak catalysis are reviewed and alternative approaches to delivering a suitable adjustment process investigated while some of these alternatives seem worthy of further evaluation including greater official coordination and the use of alternative private and official pools of capital many are politically or operationally untenable

upping the ante for political economy analysis of the international financial institutions public choice analysis has clearly demonstrated the need to consider the roles of rent seeking and bureaucratic self interest in influencing the international economic policies of national governments and the behaviour of international organisations we have reached a stage however where more attention needs to be paid to the nature of bureaucratic incentives and the degree of discretion that bureaucracies have under different circumstances it is suggested that the incentives for budget maximisation are likely to vary substantially from one institution to another specifically such incentives seem likely to be much stronger for the world bank than fot the imf the evidence presented by rolanf vaubel for budget maximisation by the imf is critically examined and it is argued that much of this evidence is equally constant with other hypotheses thus there is a need for more research on the political economy of the international financial institutions

the high politics of imf lending analysts have long suspected that politics affects the lending patterns of the international monetary fund imf but none have adequately specified or systematically tested competing explanations this paper develops a political explanation of imf lending and tests it statistically on the developing countries between 1985 and 1994 it finds that political realignment toward the united states the largest power in the imf increases a country s probability of receiving an imf loan a country s static political alignment position has no significant impact during this period suggesting that these processes are best modeled dynamically an analysis of two subsamples rejects the hypothesis that the imf has become less politicized since the end of the cold war and suggests that the influence of politics has actually increased since 1990 the behavior of multilateral organizations is still driven by the political interests of their more powerful member states

imf lending programs participation and impact abstract participation in imf programs has been an option that more and more developing countries have exercised in recent years in this paper a detailed analysis of such participation over the period 1976 1986 provides a number of insights into the motivations for and the macroeconomic effects of such participation participation is driven by a combination of past performance present external influences and sluggish adjustment of developing countries the ability to predict which countries will participate in the imf program is quite good with nearly 90 percent of variation in such choices accounted for by the explanatory variables employed increased participation has as contemporaneous effects a reduction in economic growth and domestic investment and an improvement in the current account lagged effects of increased participation on economic growth and domestic investment are positive and in most estimates quantitatively greater than the contemporaneous effects there is also evidence of significantly lower public investment an increased budget surplus and real depreciation of the exchange rate with increased participation results for domestic credit creation and government current expenditure although they have a sign consistent with more austere policy cannot be shown to be significantly different from those not participating

optimal financial aid policies for a selective university our paper provides a model of optimal financial aid policies for a selective university the model implies that the financial aid package to be offered to each category of admitted applicants depends on the elasticity of the fraction who accept offers of admission with respect to the financial aid package offered them the propensity of the category to enroll the elasticity of the category s average quality with respect to the number admitted and the relative weight the university assigns them in the utility function while the latter must be determined subjectively the former parameters are subject to empirical estimation we conclude with a study of one institution s data and illustrate how they may be estimated these estimates are then applied to illustrate what the optimal financial aid policy would be for the university

first degree price discrimination goes to school personalized pricing is widely discussed but seldom observed making studies of its efficacy rare yet first degree price discrimination is common in the pricing of higher education and i use data on prices and the characteristics of students admitted to a professional graduate program at a public university to estimate a matriculation demand function i then derive linear pricing functions that maximize revenue for a target number of students by allowing these functions to depend on progressively richer sets of observables i explore the effect of personalization of pricing on profit tailoring prices to a one dimensional measure of student quality would raise revenue by 2 2 per cent above the revenue with uniform pricing pricing based on both student quality and state residency raises revenue by 8 4 per cent and further tailoring based on available observables raises prices 9 0 per cent above the maximum revenue under uniform pricing pricing that obeys current statutory tuition limits raises revenue less but still by just over half as much i also infer the welfare weights that the pricing process implicitly attaches to student characteristics

the international monetary fund in a time of crisis a review of stanley fischer s imf essays from a time of crisis the international financial system stabilization and development stanley fischer was deputy managing director of the imf from 1994 to 2001 and perhaps more than any other individual he personifies the international rapid response to financial crises in the 1990s this book is a collection of essays written during his tenure at the imf taken together the essays represent the strongest and most logical defense of imf initiatives in the 1990s in print my review essay comprises six parts in parts 2 through 4 i provide an overview of fischer s arguments in three central areas of contention stabilization policy the impact of imf programs on poverty and the imf s anticipation of and response to international financial crisis i then compare fischer s arguments to those raised by the imf s critics during that period the controversial issues of these parts can be resolved only through empirical investigation but on the issues of greatest importance from the financial crises of the 1990s both fischer and the imf s critics make logically consistent arguments with little empirical support in part 5 i review the recent empirical literature to illuminate what evidence has been found in support of or counter to the assertions of fischer and the imf s critics part 6 provides conclusions and suggestions for follow on empirical research

the value of purchase history data in target marketing an important aspect of marketing practice is the targeting of consumer segments for differential promotional activity the premise of this activity is that there exist distinct segments of homogeneous consumers who can be identified by readily available demographic information the increased availability of individual consumer panel data open the possibility of direct targeting of individual households the goal of this paper is to assess the information content of various information sets available for direct marketing purposes information on the consumer is obtained from the current and past purchase history as well as demographic characteristics we consider the situation in which the marketer may have access to a reasonably long purchase history which includes both the products purchased and information on the causal environment short of this complete purchase history we also consider more limited information sets which consist of only the current purchase occasion or only information on past product choice without causal variables proper evaluation of this information requires a flexible model of heterogeneity which can accommodate observable and unobservable heterogeneity as well as produce household level inferences for targeting purposes we develop new econometric methods to implement a random coefficient choice model in which the heterogeneity distribution is related to observable demographics we couple this approach to modeling heterogeneity with a target couponing problem in which coupons are customized to specific households on the basis of various information sets the couponing problem allows us to place a monetary value on the information sets our results indicate there exists a tremendous potential for improving the profitability of direct marketing efforts by more fully utilizing household purchase histories even rather short purchase histories can produce a net gain in revenue from target couponing which is 2 5 times the gain from blanket couponing the most popular current electronic couponing trigger strategy uses only one observation to customize the delivery of coupons surprisingly even the information contained in observing one purchase occasion boasts net couponing revenue by 50 more than that which would be gained by the blanket strategy this result coupled with increased competitive pressures will force targeted marketing strategies to become much more prevalent in the future than they are today

who pays for bank insolvency in transition and emerging economies abstract this paper explores the equity of the way losses from bank insolvencies and their avoidance through intervention by the authorities have been distributed over creditors depositors owners and the population at large in transition and emerging economies it suggests a number of regulatory reforms that would alter the balance between seeking to avoid insolvency and lowering the costs of insolvency should it occur it considers whether a lex specialis for dealing with problem banks by prompt corrective action and if necessary resolving them if their net worth falls to zero at little or no cost to the taxpayer can be applied in the circumstances of transition and emerging economies

evaluating the effect of imf lending to low income countries the purpose of this paper is twofold to apply to a group of low income borrowers from the imf the most commonly used technique for measuring the independent effects on economic developments of imf support and to develop a minimum set of diagnostic tests for determining whether necessary conditions for using the methodology exist the modified control group methodology is used to measure the effect of imf support on three key variables output growth inflation and the external debt rservice ratio the sample comprises adjustment programs begun during 1986 1991 supported by the imf s enhanced structural adjustment facility esaf the distinguishing feature of the modified control group approach is the estimation of a policy counterfactual policies that would have been followed in the absence of imf support against which to compare actual policies and resulting outcomes using this approach for the esaf the sample reveals statistically significant beneficial effects of imf support on output growth and the debtrservice ratio but no effects on inflation diagnostic tests of these results rarely if ever reported in the literature are shown to be critical in interpreting the validity of the results of assessments of adjustment lending for this sample at least the diagnostic tests cast doubt on the reliability of estimates of the effects of imf supported programs using panel data in a modified control group model the most obvious and manageable modifications to the

are currency crises predictable abstract this paper studies whether exchange rate expectations and overvaluations are predictors of currency crises the results suggest that overvaluation has predictive power in explaining the crises however although expected depreciation obtained from survey data partially takes different exchange rate misalignment measures into consideration expectations fail to anticipate currency crises

the macroeconomic effects of war finance in the united states world war ii and the korean war during world war ii government expenditures were financed primarily by issuing debt during the korean war expenditures were financed almost exclusively by higher taxes reflecting president truman s preference for balanced budgets this paper evaluates quantitatively the economic effects of the different policies used to finance these two wars counterfactual experiments are used to explore the implications of financing world war ii like the korean war and financing the korean war like world war ii the author finds that using a korean war policy during world war ii would have resulted in much lower output and welfare relative to the actual policy copyright 1997 by american economic association