to float or to fix evidence on the impact of exchange rate regimes on growth we study the relationship between exchange rate regimes and economic growth for a sample of 183 countries over the post bretton woods period using a new de facto classification of regimes based on the actual behavior of the relevant macroeconomic variables in contrast with previous studies we find that for developing countries less flexible exchange rate regimes are associated with slower growth as well as with greater output volatility for industrial countries regimes do not appear to have any significant impact on growth the results are robust to endogeneity corrections and a number of alternative specifications borrowed from the growth literature

where do we stand on choosing exchange rate regimes in developing and emerging economies the question of what is the best exchange rate regime for a country to adopt has been an important part of the macroeconomic policy debate for as long as here has been a debate about macroeconomic policy it has indeed sometimes been the dominant issue an historical review could easily go back to the nineteenth century and the debate over the gold standard and the bimetallic standard or could go back to the interwar period and the debate over the return to gold and the abandonment of the gold standard in favour of exchange rate flexibility or it could focus on the exchange rate arrangements incorporated into the bretton woods system devised in 1944 and the final collapse of those arrangements in favour of generalised flexible exchange rates in 1973

bioenergy crop production in the united states potential quantities land use changes and economic impacts on the agricultural sector the u s departments of agriculture and energyjointly analyzed the economic potential for and impacts of large scale bioenergy cropproduction in the united states anagricultural sector model polysys wasmodified to include three potential bioenergycrops switchgrass hybrid poplar and willow at farmgate prices of us 2 44 gj anestimated 17 million hectares of bioenergycrops annually yielding 171 million dry mg ofbiomass could potentially be produced at aprofit greater than existing agricultural usesfor the land the estimate assumes highproductivity management practices are permittedon conservation reserve program lands traditional crops prices are estimated toincrease 9 to 14 percent above baseline pricesand farm income increases annually by us 6 0billion above baseline at farmgate prices of us 1 83 gj anestimated 7 9 million hectares of bioenergycrops annually yielding 55 million dry mg ofbiomass could potentially be produced at aprofit greater than existing agricultural usesfor the land the estimate assumes managementpractices intended to achieve highenvironmental benefits on conservation reserveprogram lands traditional crops prices areestimated to increase 4 to 9 percent abovebaseline prices and farm income increasesannually by us 2 8 billion above baseline

long run equilibrium modeling of emissions allowance allocation systems in electric power markets carbon dioxide allowance trading systems for electricity generators are in place in the european union and in several u s states an important question in the design of such systems is how allowances are to be initially allocated by auction by giving away fixed amounts grandfathering or by allocating based on present or recent output investment or other decisions the latter system can bias investment operations and product pricing decisions and increase costs relative to the other systems a nonlinear complementarity model is proposed for investigating the long run equilibria that would result under alternative systems for power markets characterized by time varying demand and multiple technology types existence of equilibria is shown under mild conditions solutions for simple systems show that allocating allowances to new capacity based on fuel use or generator type can yield large distortions in capacity investment invert the operating order of power plants and inflate consumer costs the distortions can be smaller for tighter co2 restrictions and are somewhat mitigated if there is also a market for electricity capacity or minimum run restrictions on coal plants distortions are also less if allowances are allocated to plants in proportion to sales rather than capacity

residential attachment and housing demand in this paper a model of housing demand behavior is proposed in which both monetary and non monetary adjustment costs termed attachment are allowed to affect demand levels an empirical implication of the model is that the individual variance around the housing demand curve is likely to increase directly with total adjustment costs a cross section housing demand curve is estimated with the variance specified as a linear function of variables thought to be correlated with total adjustment costs the results provide qualified support for the assertion that adjustment costs influence housing demand behavior in the manner suggested by the theoretical model

borrowing from the imf the policy implications of recent empirical research abstract at a time when the future of the international monetary fund is being widely debated a number of relevant and important studies have been published which advance our knowledge of the factors which determine borrowing from the fund there has been little attempt however to put this recent empirical research into context or to extract from it appropriate policy conclusions while dissent remains over some issues there is an emerging consensus on others which provides a firm empirical foundation for policy formulation unfortunately the policy stance adopted by the g7 is in many ways at odds with much of the recent empirical research

are environmental fiscal incentives effective in inducing energy saving renovations an econometric evaluation of the french energy tax credit abstract fiscal incentives have been introduced to encourage households in many countries to undertake energy saving renovations this paper assesses the impact of an energy tax credit on i renovation rate and ii renovation expenditures using french data we exploit a sharp discontinuity corresponding to the introduction of the french tax credit in 2005 to identify the policy s effects results indicate that the tax credit has little effect on the decision to renovate increasing renovations by 1 09 ceteris paribus we find that the presence of free riding reduces the actual effect of fiscal measures however this fiscal policy does lead to an increase in renovation expenditures by 21 76 all things being equal this suggests that the energy tax credit induces households who are already determined to renovate to perform more substantial energy saving renovations we conduct a robustness check using the matching method which confirms our results

the impact of transaction costs and the expected length of stay on homeownership abstract economic theory suggests that an increase in the expected length of stay in a dwelling increases the probability of a household choosing to own a house rather than rent this hypothesis is derived from recognition that there are substantial transaction costs associated with homeownership and increased expected time in the home reduces the annualized transaction cost using a military data set we confirm that expected length of stay in a dwelling and the transaction costs of selling are very important to the ownership decision our best estimate of the transaction costs of selling a home are the sum of 3 of house value and 4 of household earnings

rehabilitation decisions in rental housing an empirical analysis abstract housing policy makers show increased interest in encouraging rehabilitation of the existing housing stock but little is known about what factors influence the decision to invest particularly in rental housing making policy design difficult this paper presents an empirical analysis of individual landlords housing rehabilitation decisions in one housing market the analysis tests hypotheses about the impacts of detailed neighborhood structure and site characteristics on each owner s investment activity findings support the general hypothesis that economic returns to investment have a major effect on rehabilitation decisions identify some other important circumstances and suggest which among many specific policy levers should be effective

economic and emissions implications of load based source based and first seller emissions trading programs under california ab32 in response to assembly bill 32 the state of california considered three types of carbon emissions trading programs for the electric power sector load based source based and first seller they differed in terms of their point of regulation and in whether in state to out of state and out of state to in state electricity sales are regulated in this paper we formulate a market equilibrium model for each of the three approaches considering power markets transmission limitations and emissions trading and making the simplifying assumption of pure bilateral markets we analyze the properties of their solutions and show the equivalence of load based first seller and source based approaches when in state to out of state sales are regulated under the cap a numeric example illustrates the emissions and economic implications of the models in the simulated cases leakage eliminates most of the emissions reductions that the regulations attempt to impose furthermore contract reshuffling occurs to such an extent that all the apparent emissions reductions resulting from changes in sources of imported power are illusory in reality the three systems would not be equivalent because there will also be pool type markets and the three systems provide different incentives for participating in those markets however the equivalence results under our simplifying assumptions show that load based trading has no inherent advantage compared to other systems in terms of costs to consumers contrary to claims elsewhere

exchange rate regimes in developing and emerging economies and the incidence of imf programs summary the global economic crisis will compel many countries to revise key economic policies including their exchange rate regime the international monetary fund will have significant influence on their choices and has exhibited a bias against intermediate regimes we examine the link between exchange rate regimes and imf program use and find no evidence that countries with intermediate exchange rate regimes require more frequent imf assistance rather they appear somewhat less dependent especially when compared to fixed exchange rates our results suggest that intermediate regimes should remain a viable and possibly desirable exchange rate choice for some countries

interest rates income and home improvement decisions abstract the demand for additional housing is modeled demonstrating that higher interest rates make home improvements more attractive relative to moving when homeowners hold fixed rate mortgages technological constraints on home improvements make improving less attractive relative to moving when incomes have risen empirical evidence using cross sectional data is presented suggesting that the probability of making home improvements is positively related to increases in the current interest rate and negatively related to increases in income an explanation is offered for the recent rise in home improvement expenditures in the face of slower economic growth and higher mortgage interest rates

public sector deficits and macroeconomic performance in the 1980s chronic public sector deficits forced countries to undertake fiscal adjustment the need to face hard choices continues in the 1990s but the problem is not a simple and easily diagnosed one with an obvious solution rather public sector deficits have had widely differing consequences high inflation in some countries low inflation but also low investment and growth in others and in still others no evident short term macroeconomic spillovers this book presents the findings of a world bank research project designed to shed light on the complex dynamics of public sector deficits it includes an in depth examination of eight countries argentina chile colombia cote d ivoire ghana morocco pakistan and zimbabwe these cases are analyzed within a comprehensive theoretical framework elaborated for the study and in conjunction with cross country data from a larger set the book draws the following conclusions the ways chosen to finance deficits money creation debt or arrears go far to explain medium term financial and macroeconomic imbalances but in the short term these relations are blurred deficits tend to be bad for growth they increase financial and price instability and crowd out private investment public saving typically reduces private saving only slightly increasing public saving is a very effective policy instrument for raising national saving fiscal adjustment typically leads to a lower trade deficit and a moredepreciated real exchange rate finally the blame for large systemic public deficits must be placed not on bad luck but on unwise policy choices and conversely sound fiscal policies can set a country on a path leading to stability and growth

exchange rate regime durability and performance in developing versus advanced economies abstract drawing on new data and advances in exchange rate regimes classification we find that countries appear to benefit by having increasingly flexible exchange rate systems as they become richer and more financially developed for developing countries with little exposure to international capital markets pegs are notable for their durability and relatively low inflation in contrast for advanced economies floats are distinctly more durable and also appear to be associated with higher growth for emerging markets our results parallel the baxter and stockman classic exchange regime neutrality result though pegs are the least durable and expose countries to higher risk of crisis

banks financial liberalisation and financial crises in emerging markets the east asian financial crisis has raised a series of important issues amongst them is the question of the role of the banking sector and financial liberalisation in contributing to financial crises how do weaknesses in the domestic banking sector when combined with both domestic and international financial liberalisation engender currency crises what is lacking in the literature is a simple conceptual framework within which these connections can be conceptualised and drawn out and in which the role of banks is explicitly discussed this paper seeks to provide just such a framework within it international financial liberalisation can be seen as fuelling a boom in domestic credit which leads to acute balance sheet problems for domestic banks and exposes the country concerned to a currency crisis in the event of a sudden reversal of capital inflows which banking weaknesses may itself trigger

a game theory analysis of market incentives for us switchgrass ethanol the renewable fuel standard 2007 set aggressive cellulosic biofuel goals that have not been realized corn ethanol dominates the market and penetration of cellulosic ethanol is unlikely in the near term due to economic and technical barriers this paper uses game theory to model biomass and ethanol production decisions and calculate the incentives that would be necessary to drive the industry to obtain the cellulosic ethanol goals after identifying the desired performance of a cellulosic ethanol supply chain a nonlinear optimization model is developed to analyze two major scenarios that estimate conservative and optimistic technological improvements in cellulosic biomass and ethanol production a potential carbon market is explored to determine its efficacy as an incentive mechanism results indicate that a carbon market would only be sufficient to incentivize a cellulosic ethanol industry under the optimistic improvement scenario with the highest switchgrass price for all other scenarios the carbon price needed to incentivize the industry would exceed the reasonable range and additional incentives would be needed to achieve the production goals of the renewable fuel standard

an institutional economic analysis of the decision to do it yourself in housing renovation this paper examines home renovators decision in choosing do it yourself diy or hiring contractors diy may reduce financial pressure but may lead to potential domestic discord and perils of incompetence hiring contractors may alleviate time pressures but may require more financial resource this choice is modelled as analogous to williamson s corporate strategic decision between outsourcing and internalisation in the context of vertical integration and extended via richardson s capabilities based theory with social reputation effect taken into account based on a survey of brisbane home renovators it is found that the richardson s thesis seems stronger than the williamson s when applied to housing renovation and that trust issues in respect of contractors are paramount

the indirect land use impacts of united states biofuel policies the importance of acreage yield and bilateral trade responses recent work has highlighted agricultural land conversion as a significant debit in the greenhouse gas accounting of ethanol as an alternative fuel this work has at the same time sparked considerable debate on the role of crop yield growth as a means of avoiding rapid land conversion we examine the agricultural land use impacts of mandate driven ethanol demand increases in the united states in a formal economic equilibrium framework which allows us to examine the importance of yield price relationships we find that the standard assumption of trend yield growth is likely restrictive for analysis of equilibrium response to significant demand increases for fuel feedstocks furthermore we identify both the acreage response and bilateral trade specification of a multi country model as important sources of variability in terms of parametric uncertainty in predicting global land use change from the biofuels boom

biofuel supply chain design under competitive agricultural land use and feedstock market equilibrium abstract the rapid expansion of the biofuel industry diverts a large amount of agricultural crops as energy feedstocks and in turn affects farm land allocation feedstock market equilibrium and agricultural economic development in local areas in this paper we propose game theoretic models that incorporate farmers decisions on land use and market choice into the biofuel manufacturers supply chain design problem a noncooperative bi level stackelberg leader follower game model and a cooperative game model are developed respectively to address possible business partnership scenarios between feedstock suppliers and biofuel manufacturers the models determine the optimal number and locations of biorefineries the required prices for these refineries to compete for feedstock resources as well as farmers land use choices between food and energy using corn as an example of feedstock crops spatial market equilibrium is utilized to model the relationship between corn supply and demand and the associated price variations in local grain markets with linear corn demand functions we develop a solution approach that transforms the original discrete mathematical program with equilibrium constraints dc mpec into to a solvable mixed integer quadratic programming miqp problem based on karush kuhn tucker kkt conditions the proposed methodology is illustrated using an empirical case study of the illinois state the computation results reveal interesting insights into optimal land use strategies and supply chain design for the emerging biofuel economy

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

distinguished lecture on economics in government exchange rate regimes is the bipolar view correct the choice of appropriate exchange rate regime which for economies with access to international capital markets increasingly means a move away from the middle ground of pegged but adjustable fixed exchange rates towards the two corner regimes of either flexible exchange rates or a fixed exchange rate supported if necessary by a commitment to give up altogether an independent monetary policy lawrence h summers 2000 p 8

why are latin america s savings rates so low an international comparative analysis abstract this paper presents a theoretical and empirical assessment of the determinants of savings rates with special emphasis on latin american savings rates the study is based on international comparisons using data from 36 countries for 1970 1992 a distinction is made between private and public savings the later are endogenously determined by economic and political variables per capita income growth is the most important determinant of private and public savings public savings are lower in countries with higher political instability public savings crowd out private savings but less than proportionately low latin american savings are due to the magnitudes of their determinants rather than structural differences

electricity market near equilibrium under locational marginal pricing and minimum profit conditions this paper provides a tool to determine the near equilibrium of an electric energy market this market works under locational marginal pricing i e generating units and demand loads are paid and pay respectively the locational marginal prices corresponding to the nodes they are connected to the near equilibrium is defined as the energy transaction levels for which generating companies maximize their respective profits and consumption companies maximize their respective utilities an independent system operator clears the market maximizing the social welfare conditions that ensure minimum profit for generating units can be included however these conditions may render a generating unit uncompetitive and expel it from the market demands are taken to be non constant and values are determined as part of the solution the near equilibrium is obtained through the solution of a mixed integer quadratic problem equivalent to a mixed linear complementarity problem that includes the minimum profit conditions it is important to note that the near equilibrium concept presented in this paper does not solve a market equilibrium when indivisibilities such as start up costs or the like are present lastly we validate the proposed model on a case study using data from the ieee reliability test system

economic determinants of imf financial arrangements abstract we analyze factors that lead to imf approval of financial arrangements we account for both economic variables that induce a country to seek an imf arrangement demand side factors and macroeconomic policy commitments that the imf considers when deciding whether to approve it supply side factors using a pooled sample of annual observations for 91 developing countries over 1973 1991 we obtain maximum likelihood bivariate and univariate probit estimates of the approval of an imf arrangement for a given country in a given year a number of demand side and supply side variables are statistically significant determinants of the approval of an imf arrangement

enhanced models and improved solution for competitive biofuel supply chain design under land use constraints abstract this paper studies the effect of government regulation on farmland use to balance food and energy production in a competitive biofuel supply chain design framework we propose a stackelberg nash game model with a direct land use constraint that captures farmland food and fuel market equilibrium to provide farmers with incentives to comply with the land use regulation we implement the land use constraint through a cap and trade mechanism which we show attains equivalent land use patterns we further prove the existence of optimal solutions of the two equivalent discretely constrained mathematical program with equilibrium constraints dc mpec models two adaptive relax and tighten schemes integrality and lagrangian duality based relaxation are proposed to handle the binary variables in a mixed integer formulation of the models the proposed methodology is tested in a case study for the state of illinois the computational results demonstrate the superiority of our customized algorithms to publicly available solvers for solving problems with realistic sizes finally the efficiency of the cap and trade mechanism is demonstrated through comparisons of scenarios with and without regulation as well as a sensitivity analysis on the cap and trade level the cap and trade policy is found to effectively reduce biomass farmland use and profits of the biofuel industry it may have different impacts on social welfare depending on problem settings and market parameters cap and trade levels also affect system behavior and thus should be carefully selected

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

moving and improving strategies for attaining housing equilibrium the concept of equilibrium consumption is central to much housing market analysis yet analysts must contend with the likelihood that many housing consumers are not at an exact equilibrium level of

the impacts of lending race and ownership on rental housing rehabilitation abstract this paper presents an empirical analysis of landlords rehabilitation investment decisions in a large sample of buildings in one city focusing on impacts of lending patterns race and ownership the study finds that availability of loans from major institutional lenders banks and savings and loans in a neighborhood has a substantial independent impact on repair decisions after controlling for a multitude of other neighborhood and building variables for all landlords taken together loan availability problems rather than owners discriminatory attitudes seem to discourage some otherwise profitable repairs in black neighborhoods but significant differences appear between owner occupant landlords and others after detailing these findings the paper summarizes several policy directions they suggest

owner occupied housing capital gains and the tax reform act of 1986 abstract previous homeowners face a nonlinear kinked budget constraint because they can avoid paying tax on the capital gain from the sale of their home if they purchase a more expensive home when they move simulation results suggest that the tax reform act of 1986 tra86 has enhanced the importance of the capital gains kink by raising the after tax cost of housing through lower marginal income tax rates while increasing the tax rate on capital gains as a result a reduction in the capital gains tax rate would reduce housing demand as some families currently at the kink would buy a less expensive home our findings also indicate that the level of excess burden increases with the capital gains tax rate but that tra86 reduced the size of implicit price subsidies received by owner occupiers and related deadweight loss by roughly one half however the distribution of benefits and deadweight loss from the favorable tax treatment of housing remains heavily weighted to higher income families in addition the size of the implicit housing subsidy and related distortion is sensitive to the level of mortgage rates

regional heterogeneity in the relationship between fiscal imbalances and foreign exchange market pressure summary the relationship between fiscal imbalances and other macroeconomic variables is complex and multifaceted however it remains important to understand it not least in order to facilitate the design of appropriate policy one central issue is whether the relationship varies across countries or groups of countries if it does an implication is that policy will also have to be differentiated this paper empirically explores the relationship between fiscal imbalances and pressures in the foreign exchange fx market in latin america caribbean lac and east asia the pacific eap regions using panel data over 1970 2000 it finds that fiscal imbalances have a significant effect on fx pressures in lac but not in eap

economywide implications from us bioenergy expansion the energy independence and security act of 2007 eisa sets a goal for 36 billion gal lons of biofuels available by 2022 according to the renewable fuels standard rfs the rfs is accompanied by tax credits which are sub ject to change tax credits are used as produc tion incentives for different types of ethanol made from corn starch and cellulosic material 1 there are arguments for and against the use of tax credits generally tax credits are considered as welfare reducing instruments similar to subsi dies however tax credits could be rationalized as improving energy security and reducing green house gas emissions as they can correct for mar ket failures wallace e tyner 2007 and paul n leiby 2007 furthermore tax incentives for an infant industry such as cellulosic ethanol might be justified where there are dynamic learning costs ian sheldon and matthew roberts 2007 it is estimated that tax credits could cost taxpay ers nearly 28 7 billion annually by 2022 harry

a two stage econometric analysis of the housing extension decision in kumasi ghana much empirical work has been undertaken on housing production investment levels and on the changes necessary to increase the supply of housing at a national level the implicit assumption in these perspectives that owners buy and sell housing as an adjustment process is not realised in all housing markets around the world in fact in a number of developing countries houses are seldom bought or sold one such country is ghana here traditional economic perspectives on modelling an owner s decision to extend by comparing it with his decision to sell and move are largely irrelevant this paper seeks to make a contribution to the analysis of housing supply by developing a housing extension model for the asante culture in ghana the model is evaluated in a two step econometric analysis of the decision to extend in the first stage the probability of extending is modelled as a function of household characteristics while the second stage predicts the amount spent on the extension

real and nominal interest rates and the demand for housing abstract this paper is an empirical study of the relationship between inflation expectations and the demand for housing the major findings are that housing demand is a function of both expected inflation and the real interest rate but that demand cannot be specified as a function of the nominal rate it is also shown that expected inflation has a larger impact on those households that are likely to be constrained by capital market imperfections

house extensions and housing market adjustment a case study of wokingham this paper identifies possible explanations of house extension based on the literature relating to house improvement and the decision to move house extension both as a form of housing market adj

the economic characteristics of imf program countries abstract a logit analysis is utilized to identify the factors that characterized developing nations that entered imf stabilization programs in the early 1980s program countries recorded higher rates of domestic credit growth larger shares of government expenditure more severe current account deficits smaller reserve holdings and lower per capita incomes

nominal loss aversion housing equity constraints and household mobility evidence from the united states abstract this paper exploits the recent variation in us house prices to examine the effect of equity constraints and nominal loss aversion on household mobility detailed data from the 1985 1996 national longitudinal survey of youth nlsy79 were matched with house price data from 149 metropolitan areas to estimate instrumental variables linear probability and semi parametric proportional hazard models of intra metropolitan mobility household mobility is significantly influenced by nominal loss aversion there is little evidence that low equity because of fallen house prices constrains mobility

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed