aid and exchange rate adjustment in african trade liberalisations most african governments must except for short periods of time set macroeconomic policies which are compatible that is trade restrictions the exchange rate and budgetary cum monetary policy must be coordinated in such a way as to avoid depletion of foreign exchange reserves often the potential for departure from compatibility is minimal for example for some years the tanzanian economy was run with reserve cover of only a few days of imports 2 trade liberalisation must therefore involve continuous coordination with other policies so as to maintain compatibility one theoretical possibility is for a gradual creep towards liberalisation with coordination achieved by ex post fine tuning however recent surveys of numerous non african trade liberalisations papageorgiou et al i99i conclude that large abrupt liberalisations have proved more sustainable apart from economic considerations it is quite possible that for political reasons gradual trade liberalisation is not feasible in africa transient political windows of opportunity are either seized with an abrupt liberalisation or missed altogether further donors may insist on liberalisation being abrupt such a liberalisation starkly poses the coordination problem and this paper uses a simple computable general equilibrium model cge to explore alternative compatible strategies in an africa type economy the essence of the compatibility problem can be seen by considering the consequence of a liberalisation in which no other policies are changed the reduction of tariffs or more commonly the relaxation of quotas will lower the domestic price of importable goods and thereby reduce the demand for money 3 being a stock effect in the short term this will dominate any changes in the money supply brought about by the fiscal implications of liberalisation since these are flow effects hence there will be an excess supply of money and so a payments deficit the paper investigates three alternative strategies which prevent such an outcome each maintaining compatibility the first section 2 is to achieve an offsetting increase in the demand for money through devaluation the second section 3 is to use programme aid to finance a deficit until the money supply is sufficiently depleted these two extremes respectively characterise the post i986 nigerian trade liberalisation and all

limited intertemporal commitment and job design abstract the paper shows that some of the guidelines for job design that emerge from a static analysis of the multitask agency problem can be overturned in a dynamic model with limited commitment static analyses have shown that it is optimal to assign workers sole responsibility for tasks and to allocate them tasks which are as homogeneous as possible with respect to the ease of measuring performance our dynamic analysis demonstrates that it can instead be optimal to make workers jointly responsible for tasks and to make their task portfolios as similar to one another but as internally diverse as possible

performance comparisons and dynamic incentives it is well known that comparative performance information cpi can enhance efficiency in static principal agent relationships by improving the trade off between insurance and incentives in the design of explicit contracts in dynamic settings however there may be implicit as well as explicit incentives for example managerial career concerns and the ratchet effect in regulation we show that the dynamic effects of cpi on implicit incentives can either reinforce or oppose the familiar static insurance effect and in either case can be more important for efficiency the overall welfare effects of cpi are thus ambiguous and can be characterized in terms of the underlying information structure

collusion and renegotiation in a principal supervisor agent relationship this paper describes a principal agent relationship with a supervisor who has information about the agent the agent and the supervisor have the possibility to collude and misinform the principal from the literature we know that there exists an optimal contract which excludes collusion in equilibrium the optimal contract however is ex post inefficient and creates scope for renegotiation if renegotiation is allowed then under some parameter constellations the optimal contract is a contract which necessarily induces collusion the paper thus shows that the principal s behavior toward ex post inefficiencies may determine whether collusion occurs in equilibrium

collusion under asymmetric information when applied to groups the revelation principle postulates a bayesian nash behavior between agents their binding agreements are unenforceable or the principal can prevent them at no cost we analyze instead a mechanism design problem in which the agents can communicate between themselves and collude under asymmetric information we characterize the set of implementable collusion proof contracts both when the principal offers anonymous and nonanonymous contracts after having isolated the nexi and the stakes of collusion we proceed to a normative analysis perform some comparative statics discuss our concept of collusion proofness and provide some insights about transaction costs in side contracting

european union developing country ftas overview and analysis this paper explores the complex structures of recent free trade agreements ftas between the european union and developing countries surveys the main factors determining their economic effects and presents quantitative simulations of the effects of these agreements limitations of product coverage substantially reduce the potential benefits of the agreements compared to full bilateral free trade while only the mexico chile and turkey agreements have trade related commitments which are wider and deeper than the preferential reduction in tariffs in the case of egypt existing levels of protection mean that it is moving toward regional free trade with many domestic distortions still in place producing a significant loss for the egyptian economy

toward a theory of regulation for developing countries following jean jacques laffont s lead the efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction however recent reforms aimed at improving the performance of these sectors have had limited success evidence suggests that in many instances this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries this article surveys more recent theoretical work focusing on problems with regulation in these countries at the heart of the survey is the work of jean jacques laffont who in the last decade of his life set about developing a theoretical framework for regulation in developing countries we consider the implications of his work which focused on the key institutional limitations faced in developing countries we then discuss where experience suggests that there are important omissions from this modeling bringing in extensions and alternative approaches pursued by other authors we conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak overall we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries

learning from private and public observations of othersʼ actions we study how a continuum of agents learn about disseminated information by observing others actions every period each agent observes a public and private noisy signal centered around the aggregate action taken by the population the public signal represents an endogenous aggregate variable such as a price or a quantity the private signal represents the information gathered through private communication and local interactions we identify conditions such that the average learning curve is s shaped learning is slow initially intensifies rapidly and finally converges slowly to the truth we show that increasing public information always slows down learning in the long run and under some conditions reduces welfare lastly optimal diffusion of information requires that agents strive to be different agents need to be rewarded for choosing actions away from the population average

uncertainty economic reforms and private investment in the middle east and north africa during the 1980s and the 1990s private investment in the middle east and north africa mena has on average shown a decreasing or stagnant trend this contrasts with the situation of the asian economies where private investment has always been more dynamic in this paper it is empirically shown for a panel of 39 developing economies among which four mena countries that in addition to the traditional determinants of investment such as the growth anticipations and the real interest rate government policies explain mena s low investment rate insufficient structural reforms which have most of the time led to poor financial development and deficient trade openness have been a crucial factor for the deficit in private capital formation the economic uncertainties of the region have represented another factor of the firm s decisions not to invest these uncertainties have consisted of the external debt burden and various measures of volatility

information learning and the stability of fiat money abstract we analyze the stability of monetary regimes in an economy where fiat money is endogenously created by the government information about its value is imperfect and learning is decentralized we show that monetary stability depends crucially on the speed of information transmission in the economy our model generates a dynamic on the acceptability of fiat money that resembles historical accounts of the rise and eventual collapse of overissued paper money it also provides an explanation of the fact that despite its obvious advantages the widespread use of fiat money is only a recent development

the distribution of money balances and the nonneutrality of money recent monetary models with explicit microfoundations are made tractable by assuming that agents have access to centralized markets after one round of decentralized trade given quasi linear preferences this makes the distribution of money degenerate which keeps the models simple but precludes the discussion of distributional effects of monetary policy we generalize these models by assuming two rounds of trade before agents can readjust their money holdings to study a range of new distributional effects analytically we show that unexpected symmetric lump sum money injections may increase short run output and welfare whereas asymmetric injections may increase long run output and welfare

evaluating the impact of world bank structural adjustment lending 1980 87 this article attempts to evaluate the world bank s programme aid in the form of structural adjustment loans with emphasis on the distinction between the influence of programme finance and the influence of the policy conditions attached to this finance the rate of return on world bank programme aid measured in terms of the impact of gdp growth rates is found to have been disappointing the study also identifies a negative correlation between structural adjustment loans and investment it was also found that the bank programme aid s strongest beneficial effect has been on the balance of payments current account both via the stimulation of exports and via the curbing of imports

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

coexistence of money and interest bearing securities abstract a random matching model with money is used to study the nominal yield on small denomination bearer safe discount securities issued by the government there is always one steady state with matured securities circulating at par and for some parameters another with them circulating at a discount in the former a necessary and sufficient condition for a positive nominal yield on not yet matured securities is exogenous discriminatory treatment of them by the government in the latter the post maturity discount on securities induces a deeper pre maturity discount even without such discriminatory treatment

price dispersion information and learning abstract we consider an economy where trade is decentralized and agents have incomplete information with respect to the value of money agents learning evolves from private experiences and we explore how the formation of prices interacts with learning we show that multiple equilibria arise and equilibria with price dispersion entail more learning than equilibria with one price price dispersion increases communication about private histories which in turn increases the overall amount of information in the economy we also compare ex ante welfare under price dispersion and one price our results show that despite the existence of some meetings where no trade takes place ex ante welfare under price dispersion may be higher than under one price

renegotiation and information revelation over time the case of optimal labor contracts the paper analyzes the issue of commitment in grossman and hart s model of optimal labor contracts under asymmetric information about firm profitability we extend their framework by allowing employment to vary over time at equidistant intervals when both parties can precommit ex ante not to renegotiate the contract this replicates the grossman hart outcome each subperiod when precommitment is not possible information revealed through the contract can create pareto improving renegotiation opportunities and the issue of optimal information revelation arises the paper analyzes the impact of ex post pareto improving renegotiations on the optimal contract

contract renegotiation a simple framework and implications for organization theory this paper provides a unifying framework for studying renegotiation of contracts in the presence of asymmetric information we show that interim renegotiation does not constrain the set of contracts attainable with full commitment regardless of whether renegotiation offers are made by the informed or the uninformed agent ex post renegotiation however does constrain the set of attainable contracts these constraints depend on the identity of the agent making the renegotiation offer we then show how the theory of contract renegotiation can provide insights for organization theory specifically we show how decentralization of decision making can be an optimal response to the threat of ex post renegotiation finally we show that our framework can be used to analyse the trade off between internal and external markets

short run and long run effects of changes in money in a random matching model a random matching model of money is used to deduce the effects of a once for all change in the quantity of money it is shown that the change has short run effects that are predominantly real and long run effects that are in the direction of being predominantly nominal provided that the change is random and people learn its realization only with a lag the change in the quantity of money comes about through a random process of discovery that does not permit anyone to deduce the aggregate amount discovered when the change actually occurs

beneficial collusion in corruption control the case of nonmonetary penalties abstract we analyze a corruption model where a principal seeks to control an agent s corruption by supplementing a costless noncollusive outside detector such as the media with a collusive internal supervisor the principal s objective is to minimize the overall costs made up of enforcement costs and social costs of corruption if the penalties on the corrupt agent and a failing supervisor are nonmonetary in nature and yet the two parties can engage in monetary side transfers the principal may stand to benefit by allowing supervisor agent collusion this benefit may even prompt the principal to actively encourage collusion by hiring a dishonest supervisor in strict preference over an honest supervisor

corruption and rent seeking the rent seeking theory was one of thefirst economic instruments developed tomodel corruption in the public sector comparing corruption with lobbying itproposes that the former is the lesser oftwo evils since lobbying entails the wastage of resources inthe competition forpreferential treatment this study showsthat the traditional rent seeking theorymisunderstands three factors first theimpact of a corrupt monopoly on the rent ssize second corruption as a motivationfor supplying preferential treatment andthird that corruption involves a narrowerrange of interests than those ofcompetitive lobbying taking these factorsinto consideration the opposite argumentis valid corruption has worse welfareimplications than alternative rent seekingactivities

adaptive learning and monetary exchange abstract this paper investigates three classic questions in monetary theory how can an intrinsically worthless asset such as fiat money maintain value as a medium of exchange what are the short run and long run effects of a change in the money supply what is the social cost of inflation i answer these questions using a microfounded model of monetary exchange that replaces the rational expectations assumption with an adaptive learning rule first i show that monetary exchange is a robust arrangement in the sense that agents are able to learn the stationary monetary equilibrium while the non monetary equilibrium is unstable under learning second an unanticipated monetary injection has real effects in the short run because learning the value of money takes time in the long run agents successfully learn the value of money hence money is neutral third under a constant money growth policy an increase in the growth rate of money increases output in the short run producing a short run phillips curve a ten percent increase in the money growth rate has a social cost of 0 41 percent of output per year alternatively a ten percent decrease in the money growth rate has a social benefit of 0 37 percent of output per year

the investment decision a re examination of competing theories using panel data in the united states gross business fixed investments constitute about 10 percent of the gross national product gnp such investments may represent gnp s most important component because a plant and equipment have a long term effect on the economy s productive capacity b changes in investment spending directly affect employment levels and workers incomes in durable goods industries and c supply and demand are sensitive to investment changes economists have long been concerned about what determines capital spending investments using data for us manufacturing firms for 1972 90 the author compares five investment theories accelerator theory cash flow theory neoclassical theory modified neoclassical theory and q theory if the results for cross section regressions can be viewed as representing the long term equilibrium the single most important determinant of capital spending appears to be cash flow apparently managers care more about cash flow and cost of capital than about stock market signals and the level of output and at the firm level managerial perceptions about fundamentals are more important that market perceptions for managers the stock market may be a side show to capital spending decisions to generalize in a way useful for developing countries firm level financial decisions are closely linked to real decisions in the economy internal finance is the most important use of funds so there is a close relationship between real and financial decisions

nonneutrality of money in dispersion hume revisited for a class of standard and widely used preferences a one shot money injection in a standard matching model can induce a significant and persistent output response by dispersing the distribution of wealth decentralized trade matters for both persistence and significance in the presence of government bonds the injection has a liquidity effect and the inflation rate right following the injection may be below the steady state rate level

adverse selection and renegotiation in procurement as was shown by dewatripont optimal long term contracts are generally not sequentially optimal the parties ex post renegotiate them to their mutual advantage this paper fully characterizes the equilibrium of a simple two period procurement situation and studies the extent to which renegotiation reduces ex ante welfare i a central result is that like in the non commitment case the second period allocation is optimal for the principal conditionally on his posterior beliefs about the agent ii the first period allocation exhibits an increasing amount of pooling when the discount factor grows iii with a continuum of types it is never optimal to induce full separation the paper also analyzes whether renegotiated long term contracts yield outcomes resembling those under either unnegotiated long term contracts or a sequence of short term contracts and it links the analysis with the multiple unit durable good monopoly problem

liquidity quality production cost and welfare in a search model of money this paper examines a search model of money with divisible commodities of high and low quality while keeping the assumptions of indivisible money and unit inventory constraint with no direct barter and a higher fixed cost of producing high relative to low quality an increase in the money stock encourages the production of high quality output by trading off the larger trading opportunities against the significance of higher fixed cost as long as the fixed cost differential between high and low quality is sufficiently small relative to the utility gain from high quality consumption the quality improvement outweighs the negative effect of higher money stocks on aggregate production and hence implies higher welfare the most important function of money is its role as a medium of exchange wicksell 1906 1967 p 17 defined a general medium of exchange to be an object which is habitually and without hesitation taken by anybody in exchange for any commodity the main challenge facing monetary theory is to construct a model which permits the object s role in exchange to be endogenous 1 kiyotaki and wright 1991 1993 seems to be the first fully coherent model which specifies the environment and equilibrium concept in a way that does not force at the outset the assumption on which objects will play a special role in trade the kiyotaki wright model departs from the physical environment of the standard general equilibrium model through the assumption that trading histories are private information the medium of exchange role of money is obtained as an outcome of nash equilibrium together with some bargaining rule in pairwise random meetings however the standard kiyotaki wright model yields an undesirable welfare implication that an increase in the money stock eventually leads to a decrease in welfare because of a decrease in the number of agents who get to consume in a given period the same welfare property is obtained in the models with divisible commodities such as trejos and wright 1995 and shi 1995 2 this property has been regarded as the outcome of the original kiyotaki wright assumptions of indivisible money and the inventory constraint agents can only carry one object either commodity or money at a time despite simplifying the distribution of money holdings these assumptions impose the restriction that agents are not allowed to produce while they hold money

has recovery begun africa s adjustment in the 1980s revisited this article reviews the 1989 debate between the world bank and the economic commission for africa over africa s adjustment and on the basis of most recent statistics concludes that there is little evidence that the region is in throes of a recovery some countries however did relatively better than others in the 1980s and an attempt is made to account for differences in performance it is concluded that success in adjustment results not from world bank international monetary fund programs as such but rather from policy coherence accompanied by healthy movement in key variables namely the real exchange rate and public development expenditure

the welfare costs of expected and unexpected inflation the monetary search model by lagos and wright 2005 is extended with imperfect information about nominal shocks as in lucas 1972 an analytical solution exists with logarithmic preferences in general individuals hold precautionary balances calibrated to united states postwar data the welfare cost of the monetary cycle is calculated to be small below 0 0003 of gdp compared to the welfare cost of the inflation tax around 0 25 of gdp the main reason for the minute welfare cost of the monetary cycle is its low amplitude in 1947 2007 but monetary crashes such as those experienced during the great depression can generate important welfare costs

governance and real estate markets performance in nigeria are they related governance has been identified as a key determining variable capable of influencing the performance of any economy activity on this note the study undertakes to investigate the relationship between governance and the real estate markets performance in nigeria the study employs ardl methodology of bound testing approach for the quarterly series spanning 1996q1 to 2010q4 of the variables considered the prominent role of real gdp and governance index were clearly brought to fore both in the short and long run while that of inflation and interest rates were less pronounced statistically the result of ecm further accentuates connection between governance and the real estate market through the establishment a stable long run relationship between them in the final analysis a few policy prescriptions are advice for the attention of all stakeholders in the built environment

efficient propagation of shocks and the optimal return on money abstract we study optimal allocations in an environment in which money is essential due to lack of commitment and anonymity of individuals because the economy features aggregate preference shocks we apply a notion of implementability that allows for allocations with non trivial business cycle dynamics for the propagation of shocks we show that history dependence is predicted by the theory of second best and becomes necessary for optimality when the degree of patience is neither too low nor too high our analysis concludes with a discussion of whether there is a role for the propagation of shocks in alternative economic environments

volatile policy and private information the case of monetary shocks abstract we study how volatility in monetary policy affects economic performance in the presence of asymmetric information and endogenously chosen information structures we consider a model in which in the absence of either feature the equilibria would be efficient the equilibria that we find are inefficient for two reasons first in some cases agents fail to trade even though it is efficient to do so second agents spend resources acquiring socially useless information the model predicts a nonlinear relationship between inflation and output and a complex pattern of price dispersion with the nature of the relationship changing with the degree of volatility journal of economic literature classification numbers e30 e40 d82

income tax compliance in a principal agent framework previous analyses have modeled income tax evasion as a portfolio problem deriving the optimal consumption of the risky asset unreported income under the assumption of a fixed probability of detection the purpose of this paper is to examine some of these issues in tax compliance starting from a different set of assumptions in particular we compare alternative audit policies to the standard random audit policy we focus on an audit cutoff policy in which an agent triggers an audit if his or her reported income is too low and is not audited if reported income is sufficiently high this paper establishes two major results first random audit rules are weakly dominated by audit cutoff rules it can be shown given lump sum taxes and fines that these audit cutoff rules are the least cost policies which induce truthful reporting of income second the dominance of audit cutoff rules over random audit rules holds for lump sum as well as proportional taxation in fact the equilibrium consequences of the two are equivalent

credit and efficiency in centralized and decentralized economies we study a credit model where because of adverse selection unprofitable projects may nevertheless be financed indeed they may continue to be financed even when shown to be low quality if sunk costs have already been incurred we show that credit decentralization offers a way for creditors to commit not to refinance such projects thereby discouraging entrepreneurs from undertaking them initially thus decentralization provides financial discipline nevertheless we argue that it puts too high a premium on short term returns the model seems pertinent to two issues soft budget constraint problems in centralized economies and differences between anglo saxon and german japanese financing practices

the catalytic effect of lending by the international financial institutions for many less developed countries ldcs and countries in transition cits external financing is frequently an effective constraint on economic growth and development capital inflows may be used to overcome shortages of domestic saving thereby permitting higher levels of investment as well as shortages of foreign exchange thereby permitting larger quantities of imports

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

the adjustment of prices to monetary shocks when trade is uncertain and sequential trade is both uncertain and sequential money surprises are not neutral because prices at the beginning of the trading process cannot depend on its end in contrast with fixed price models in this paper sellers can change prices during trade in contrast with lucas s article here there is no asymmetry in the information about the money supply the price quoted by individual sellers may adjust slowly to changes in the targeted money supply but the distribution of quoted prices adjusts perfectly to these changes and the real price distribution is independent of the anticipated rate of change in the money supply

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

contracts under wage compression a case of beneficial collusion this paper considers a principal agent model with adverse selection and limited wage discrimination under wage compression an agent may have an incentive to free ride on other agents by manipulating his private information when collusion among the agents is not possible the principal distorts the output schedule to reduce information rent associated with the free riding opportunity under collusion however the principal can reduce the information rent by inducing side contracts among the agents thus partly removing the distortion in the output schedule we show that side contracts among the agents take place in equilibrium and that the prospect of collusion is beneficial

a contribution to the pure theory of money abstract this article analyzes a general equilibrium model with search frictions and differentiated commodities because of the many differentiated commodities barter is difficult in that it requires a double coincidence of wants and this provides a medium of exchange role for fiat currency we prove the existence of equilibrium with valued fiat money and show it is robust to certain changes in the environment rate of return dominance liquidity and the welfare implications of fiat money are discussed

money and prices a model of search and bargaining abstract this paper makes commodities divisible and incorporates bargaining into the search theoretic model of money to determine the purchasing power of money or price it is shown that two monetary equilibria always coexist where fiat money is universally accepted the two equilibria differ in price output welfare and the velocity of money sunspot monetary equilibria exist in which money is universally accepted in all states of the economy multiplicity has novel implications on the effectiveness of currency substitution and exchange market intervention journal of economic literature classification numbers c78 e40

collusion and renegotiation in hierarchies a case of beneficial corruption corruption opportunities arise when a principal delegates enforcement or audit authority to a supervisor the supervisor may then strike a deal with the agent she is supposed to monitor and conceal important information from the principal corruption imposes a constraint on governance and appears therefore to be harmful for the principal we show that this need not be the case in our model the prospect of corruption can make the principal better off the reason is that the collusion possibility generates dynamic effects which in cases where only limited intertemporal commitments can be made may be beneficial for the principal

output and price level effects of monetary uncertainty in a matching model abstract monetary uncertainty and information lags are put into a random matching model so that the resulting setting has some meetings in which producers are relatively informed and others in which consumers are relatively informed for that setting the ex ante socially optimal way to conduct trade is characterized the optimum can display a variety of relationships between money and total output and the price level while the price level is always sticky even the direction of its response and that of total output depend on the magnitude of the lag and on subtle features of the serial correlation properties of the money supply

a new suggestion for simplifying the theory of money we propose a new search theoretic model of monetary exchange with indivisible assets based on price posting instead of bargaining and incorporating noisy search this yields some familiar results plus a lot more the model admits multiple steady states due to the self referential nature of liquidity it admits cyclic chaotic and stochastic equilibria and compared to bargaining versions the dynamics are more general and have better microfoundations it generates price dispersion with interesting efficiency implications plus sticky prices and rational inattention parametric examples yield closed form solutions based on these results we suggest this should become a benchmark model in monetary economics

renegotiation of sales contracts this paper studies moral hazard contracts that may be renegotiated after an agent chooses an unobservable effort unlike in previous models a contract here contains only one compensation scheme and the agent has all the bargaining power in the renegotiation stage using a relatively weak forward induction refinement all equilibria are shown tb be second best efficient renegotiation occurs in every equilibrium if the effort set is rich the only equilibrium initial contract is a sales contract i e a scheme which sells the project to the agent this captures the idea that a party the principal who has an inherently weak renegotiation position will sometimes insist on a simple initial contract

fiscal dependence on trade taxes and trade policy reform the article focuses on fiscal implications of structural adjustment loans sals from an a priori standpoint and by reference to the experience of five countries three of these countries have had revenue enhancement after trade policy reforms and the other two cases experienced revenue depletion the central point which emerges from the study is that it is not clear that trade liberalisation leads to fiscal enhancement or fiscal depletion both a priori the orising and country analyses demonstrate that a range of outcomes is possible depending upon initial conditions and the components of any reform package

liquidity a new monetarist perspective this essay surveys the new monetarist approach to liquidity work in this literature strives for empirical and policy relevance plus rigorous foundations questions include what is liquidity is money essential in achieving desirable outcomes which objects can or should serve in this capacity when can asset prices differ from fundamentals what are the functions of commitment and collateral in credit markets how does money interact with credit and intermediation what can and should monetary policy do the research summarized emphasizes the micro structure of frictional transactions and studies how institutions like monetary exchange credit arrangements or intermediation facilitate the exchange process