exchange rate regimes and the international transmission of business cycles capital account openness matters abstract we investigate the role of exchange rate regimes in the international transmission of business cycles during the global financial crisis we find that exchange rate regimes alone did not account for differences in the international transmission of business cycles during the crisis however analysis considering capital account openness and countries with currencies pegged to the u s dollar indicates that exchange rate regimes play an important role in shaping business cycle co movement adopting a fixed regime with high capital account openness additionally increased business cycle co movement with the united states during the crisis whereas u s dollar peggers with relatively restrictive capital accounts during the crisis were not found to affect business cycle transmission

the international transmission of real business cycles the authors present a stochastic model of two barter economies with production linked by free trade in goods and securities which generates pareto efficient international transmissions of business cycle disturbances each country is inhabi ted by an infinitely lived representative firm and consumer worker and is subject to country specific production shocks the internation al capital market effects perfect pooling of country specific risk c onsumption and output volatility may be higher in trade than under au tarchy as agents can be induced to undertake additional risk in exchange for a higher expected utility copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

natural resources curse or blessing are natural resources a curse or a blessing the empirical evidence suggests that either outcome is possible this paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources these include that a resource bonanza induces appreciation of the real exchange rate deindustrialization and bad growth prospects and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law corruption presidential democracies and underdeveloped financial systems another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad induces corruption especially in nondemocratic countries and keeps in place bad policies finally resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets the survey also offers some welfare based fiscal rules for harnessing resource windfalls in developed and developing economies

u s and canadian industrial production indices as coupled oscillators abstract this paper uses ozaki s 1985 variable amplitude coefficient model to explore the impact of different types of dynamical linkages coupling between the indices of industrial production for the u s and canada empirical analysis reveals that for each country the requisite lag structure extends for up to six years and that the coupling linkages are functions of lagged changes in growth rates incorporating these linkages leads to an increased degree of oscillation in the equilibrium paths a marginal improvement in stability and somewhat greater synchronization between the two series the out of sample forecasts for each series are improved by the coupling

the long term consequences of resource based specialisation using geological variation in oil abundance in the southern us i examine the long term effects of resource based specialisation through economic channels in 1890 oil abundant counties were similar to other nearby counties but after oil was discovered they began to specialise in its production from 1940 90 oil abundance increased local employment per square kilometre especially in mining but also in manufacturing oil abundant counties had higher population growth higher per capita income and better infrastructure 2010 the author s the economic journal 2010 royal economic society

model uncertainty and exchange rate volatility this article proposes an explanation for shifts in the volatility of exchange rate returns agents are uncertain about the true data generating model and deal with this uncertainty by making inference on the models and their parameters approach i call model learning model learning may lead agents to focus excessively on a subset of fundamental variables consequently exchange rate volatility is determined by the dynamics of these fundamentals and changes as agents alter models i investigate the empirical relevance of model learning and find that the change in volatility of gbp usd in 1993 was triggered by a shift between models

the elusive curse of oil abstract our goal is to show that contrary to the claims made in several recent papers the effect of a large endowment of oil and other mineral resources on long term economic growth of countries has been on balance positive moreover the claims of a negative effect of oil and mineral wealth on the countries institutions are called into question

political cleavages and changing exposure to trade combining the classical theorem of stolper and samuelson with a model of politics derived from becker leads to the conclusion that exogenous changes in the risks or costs of countries external trade will stimulate domestic conflict between owners of locally scarce and locally abundant factors a traditional three factor model then predicts quite specific coalitions and cleavages among owners of land labor and capital depending only on the given country s level of economic development and its land labor ratio a preliminary survey of historical periods of expanding and contracting trade and of such specific cases as the german marriage of iron and rye u s and latin american populism and asian socialism suggests the accuracy of this hypothesis while the importance of such other factors as cultural divisions and political inheritance cannot be denied the role of exogenous changes in the risks and costs of trade deserves further investigation

real aspects of exchange rate regime choice with collapsing fixed rates abstract typical evaluations of the choice of exchange rate regime examine the performance of the real economy and assume that the regimes last indefinitely in contrast actual regimes are quite transitory this paper examines how the predictions of two popular models for the determination of some real economic variables must be modified when agents rationally perceive that a fixed rate regime will be transitory the models studied are simple stochastic versions of the models in dornbusch 1976 and flood and marion 1982

do giant oilfield discoveries fuel internal armed conflicts we use new data to examine the effects of giant oilfield discoveries around the world since 1946 on average these discoveries increase per capita oil production and oil exports by up to 50 percent but these giant oilfield discoveries also have a dark side they increase the incidence of internal armed conflict by about 5 8 percentage points this increased incidence of conflict due to giant oilfield discoveries is especially high for countries that had already experienced armed conflicts or coups in the decade prior to discovery

selection and influence interest groups and congressional voting on trade policy studies of the effects of interest groups on congressional roll call voting typically view party and ideology as competing factors and rely on a factoral model of interests or a sectoral model including only interest groups with a direct stake in the vote we depart from that strategy in several ways we define interest groups at the level of standard industrial classification two digit codes and observe the universe of interests for 1979 90 we use measures of geographically and nongeographically based economic interests to estimate the representative s party and ideology we also consider the factor endowments of individuals within a district to examine their impact on floor votes we then investigate the influence of these interests on members party affiliation and ideology as well as a pool of five floor votes on foreign trade using instrumental variables for party and ideology economic interests account for a substantial portion of the variance in all cases and models that also include other explanatory variables are highly accurate in estimating floor votes

oil price volatility financial institutions and economic growth abstract theory attributes finance with the ability to both promote growth and reduce output volatility and therefore increase energy security but evidence is mixed partly due to endogeneity effects for example financial institutions themselves might be a source of volatility as the events of 2008 suggest we address this endogeneity issue by using periods of extreme oil price volatility as a source of nearly exogenous volatility to study the effect of finance to do this we develop a quasi natural experiment and study the effect of the dramatic decline of oil prices in 2014 using a synthetic control methodology our hypothesis is that the ability of oil rich countries to mitigate the effects of this decline rested on the quality of their financial institutions we focus on 11 oil rich countries between 2006q1 and 2016q4 that had poor measures of financial development treatment group out of 20 such countries and synthetically create counterfactuals from the remaining control group with superior financial development we subject both to the oil price shock of 2014 and find evidence that better financial institutions do indeed reduce output volatility and mitigate its negative effect on growth in the year that showed a sustained decline in oil price to address any remaining potential endogeneity between oil prices and finance we use a cross sectionally augmented autoregressive distributed lag model with data on 30 oil producing countries over the period 1980 2016 and confirm that the effects of oil volatility on growth is mitigated with better financial institutions our results make a strong case for the support of the positive role of financial development in improving energy security and fostering growth

constituent interest vs legislator ideology the role of political opportunity cost this paper applies the economic model of legislative voting to the automobile industry domestic content vote in the u s house of representatives in 1982 we consider constituent interests for and against the ml and compare the predictive powers of alternative indicators of ideological preferences we also examine the role of political opportunity cost and find that lame ducks were significantly less likely to vote for the bill than were returnees to congress given the political advantages of voting for the bill this is consistent with the view that legislators were influenced by the case for freer trade

the curse of natural resources in fractionalized countries abstract this paper develops a model that can explain why natural resources are a blessing for some countries but a curse for others in this model natural resources cause fighting activities between rivalling groups fighting reduces productive activities and weakens property rights making productive activities even less attractive the aggregate production decrease exceeds the natural resources direct positive income effect if and only if the number of rivalling groups is sufficiently large the model thus predicts that natural resources lower incomes in fractionalized countries but increase incomes in homogenous countries empirical evidence supporting this prediction is provided

resource curse or not a question of appropriability this thesis presents three self contained essays focusing on empirical questions in growth and development economics each article addresses specific questions on why countries perform differently in particular i analyse the effect of democracy on economic development the relationship between natural resources and growth and the efficiency of foreign development assistance in the first essay democracy consolidation and growth i analyse the effect of democracy on economic growth in this context i argue that an important aspect to consider is how consolidated political systems are put simply i find that it is not only a question of how democratic countries are but also how long they have been democratic in other words economic performance tends to improve with the duration of uninterrupted democracy the performance of autocracies on the other hand tends to deteriorate over time however for newly established political systems there seems to be a cost of being democratic this implies that democracies only bear their fruit after some time the analysis has important policy implications to overcome initial straits international assistance focused on democratic consolidation may be important and a very good investment in fostering long run development the second essay resource curse or not a question of appropriability together with anne boschini and jesper roine is concerned with the relation between natural resources and economic development for most laymen as well as for most economists it would seem reasonable that countries richly endowed in natural resources also benefit from this wealth however a large literature has found a systematic negative effect of natural resource abundance on economic growth we suggest that this so called resource curse is not determined by resource endowments alone but rather by the interaction between the type of resources a country possesses and the quality of institutions in the country this combination of factors determines what we call the appropriability of a resource the concept of appropriability captures the likelihood of natural resources leading to rentseeking corruption or conflicts which in turn will harm economic development our results suggest that if institutions are good enough the curse may be turned into a blessing this may explain why some countries such as norway and botswana tend to benefit from their resources while others such as angola and sierra leone do not the third and final essay of this thesis foreign sectoral aid fungibility growth and poverty reduction is a contribution to the aid efficiency literature which is concerned with the question of whether aid helps or hinders economic development foreign development assistance is often targeted on specific public expenditure sectors if this aid is not used in the sector for which it was granted e g health education it is said to be fungible and donors may end up financing something completely different from what they intended e g military expenditures the major concern about sectoral fungibility is that the alternative use of aid may be less productive or less socially useful however measuring fungibility is not sufficient to determine whether foreign sectoral aid fungibility is actually harmful what is important is how the funds treated as fungible are used the essay starts by obtaining estimates of fungibility for 57 countries the results suggest that sectoral aid is indeed largely treated as fungible by recipient countries next to assess the economic and health effects of fungibility these estimates are incorporated into an empirical model of aid and growth as well as into a model of aid and infant mortality altogether i find no evidence of more fungible sectoral aid leading to worse performance

international effects of government expenditure in interdependent economies a dynamic analysis of the international transmission of government expenditure shocks under alternative methods of finance is presented the benchmark case of lump sum tax financing yields an expansion in both the short run and the long run levels of domestic activity while crowding out domestic consumption activity abroad declines in the short run and while it is stimulated during the transition long run activity abroad also declines with capital income tax financing the accompanying distortion outweighs the direct expenditure effects so that all these responses are reversed financing with a tax on labour produces ambiguous responses the welfare implications of these policies are also examined

capital flows investment and exchange rates abstract this paper incorporates international capital flows into a two country monetary general equilibrium model of asset prices with investment and production we calculate theoretical covariances between investment the current account the exchange rate and the terms of trade these covariances depend upon the coefficient of relative risk aversion the magnitude and sign of a country s net international indebtedness other properties of tastes and technologies and the stochastic processes on disturbances to productivity and monetary growth rates international capital flows arise from changes in world wealth and its relative composition in foreign and domestic assets

international real business cycles among heterogeneous countries abstract business cycle statistics differ widely across countries for some aggregates especially for trade related variables part of these variations relates to the size of the economies and to their distance from each other this paper asks whether a three country model is able to display the marked diversity of business cycle statistics observed across countries the model is calibrated to two specific examples canada and switzerland our findings are that most of the diversity of the business cycles can be accounted for by size and distance and that trade is not a strong channel of diffusion of cycles

empirical evidence on the insulation properties of fixed and flexible exchange rates abstract this paper investigates whether japanese output stability since the mid 1970s is attributable to the change in exchange rate regime or to the changing nature of underlying disturbances we decompose foreign and domestic influences on output movements using restrictions on the long run dynamics to identify the disturbances we find that the flexible exchange rate regime is more effective in insulating the economy from foreign disturbances than is the fixed rate regime however in the case of japan it is primarily the changing nature of the fundamental disturbances to the economy that is responsible for greater output stability since the mid 1970s

rent seeking and resource booms abstract this paper develops a model of rent seeking in which the opportunity cost of rent seeking is foregone entrepreneurship it provides conditions under which resource booms tend to lead to an increase in rent seeking activity and those in which they induce entrepreneurship we identify an important difference between the two activities which leads resource booms to bias gains in favour of rent seeking over entrepreneurship but we also show that this bias depends on the nature of the initial equilibrium

world steel production a new monthly indicator of global real economic activity this paper proposes world steel production as an indicator of global real economic activity world steel production data is published with only a one month delay thereby providing timely information for world real gdp forecasters we find that world steel production and lutz kilian s 2009 index of global real economic activity generate large gains in forecasting world real gdp relative to an autoregressive benchmark a forecast combination of world steel production kilian s 2009 index of global real economic activity and an index of the industrial production of oecd countries plus six non oecd emerging economies produces significant gains in forecasting world real gdp relative to an autoregressive benchmark

the dutch disease a disease after all many third world oil producers are encountering serious problems in building up a diversified export base while west european oil and gas producers netherlands united kingdom are suffering a decline in their traded goods manufacturing sector induced by real wage pressures it is becoming increasingly clear that high but temporary oil revenues may be somewhat ora mixed blessing the quip of the economist notwithstanding the mechanism behind this unbalance is clear enough part of the oil revenues is spent on non traded goods which leads to a real appreciation i e a rise in the relative price of non traded goods in terms of traded goods this in turn draws resources out of the non oil traded sector into the non traded goods producing sector corden and neary 1982 van wijnbergen 1980 one may say that this is an efficient response to the increase in income from oil production the united kingdom mexico egypt simply should move into oil derived industries and non traded goods and forget about their manufacturing sector until oil reserves are exhausted however many developing countries are hesitant to take this advice after all the post world war ii success stories in economic development involve without exception countries that promoted their traded goods sector aggressively moreover it is a well established stylised fact that technological progress is faster in the traded non sheltered sectors of an economy than in the non traded sector balassa 1964 is an early reference considering the hypothesis that technological progress rather than taking place exogenously with the passage of time is a function of accumulated experience the concern of countries like egypt mexico or indonesia is much easier to understand since solow 1957 and denison 1962 it is known that capital accumulation explain only a small part of economic growth if most of economic growth is caused by learning by doing induced technologica

oil growth and health what does the cross country evidence really show we show that previous results from the body of literature on the resource curse have primarily been driven by the collapse in oil prices during the mid 1980s by exploiting cross country variations in the size of initial oil endowments and the timing of oil discoveries we find that there is a stable positive relationship between oil abundance and long run economic growth using dynamic panel data methods we also find that there is no evidence that higher oil rents hinder growth however to focus on material gain means that the welfare gain from oil is understated because oil rich countries benefit more by the reduction in infant mortality and the gain in longevity interestingly such oil led health improvements are more pronounced in non democratic countries where initial heath conditions were poor and oil wealth is concentrated among the ruling elites

world business cycles under fixed and flexible exchange rates this paper studies the behavior of monthly industrial production indices during the recent periods of fixed and flexible exchange rate s the central conclusions are as follows industrial production indices are subject to stochastic trend growth the variances of the monthly growth rates are higher in the flexible exchange rate period than in the fixed exchange rate period and are related to the degree of openness and to national income more open economies tend to experience more variability while richer more diversified economies experience less and output movements have been correlated across countries under both exchange rate regimes and there is evidence of a world business cycle copyright 1988 by ohio state university press

do natural resources fuel authoritarianism a reappraisal of the resource curse a large body of scholarship finds a negative relationship between natural resources and democracy extant cross country regressions however assume random effects and are run on panel datasets with relatively short time dimensions because natural resource reliance is not an exogenous variable this is not an effective strategy for uncovering causal relationships numerous sources of bias may be driving the results the most serious of which is omitted variable bias induced by unobserved country specific and time invariant heterogeneity to address these problems we develop unique historical datasets employ time series centric techniques and operationalize explicitly specified counterfactuals we test to see if there is a long run relationship between resource reliance and regime type within countries over time both on a country by country basis and across several different panels we find that increases in resource reliance are not associated with authoritarianism in fact in many specifications we generate results that suggest a resource blessing

commodity prices and growth an empirical investigation whereas empirical evidence on the effect of higher commodity prices on the long run growth of commodity exporters is ambiguous time series analyses using vector autoregressive var models have found that commodity booms raise income in the short run in this paper we adopt panel error correction methodology to analyze global data for 1963 to 2008 to disentangle the short and long run effects of international commodity prices on output per capita our results show that commodity booms have unconditional positive short term effects on output but non agricultural booms in countries with poor governance have adverse long term effects which dominate the short run gains our findings have important implications for non agricultural commodity exporters with poor governance especially in light of the recent wave of resource discoveries in low income countries

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

using natural resources for development why has it proven so difficult developing economies have found it hard to use natural resource wealth to improve their economic performance utilizing resource endowments is a multistage economic and political problem that requires private investment to discover and extract the resource fiscal regimes to capture revenue judicious spending and investment decisions and policies to manage volatility and mitigate adverse impacts on the rest of the economy experience is mixed with some successes such as botswana and malaysia and more failures this paper reviews the challenges that are faced in successfully managing resource wealth the evidence on country performance and the reasons for disappointing results

international business cycles world region and country specific factors the paper investigates the common dynamic properties of business cycle fluctuations across countries regions and the world we employ a bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates output consumption and investment in a 60 country sample covering seven regions of the world the results indicate that a common world factor is an important source of volatility for aggregates in most countries providing evidence for a world business cycle we find that region specific factors play only a minor role in explaining fluctuations in economic activity we also document similarities and differences across regions countries and aggregates jel f41 e32 c11 c32

state space estimates of international business cycles abstract this paper uses gnp data spanning 1973 i 1987 i for canada france germany japan the u k and the u s and presents evidence that business cycles in these countries can be accounted for by an unobservable components model with one serially correlated international component and serially uncorrelated domestic components

natural resources and economic growth a meta analysis summary an important question in development studies is how natural resources richness affects long term economic growth no consensus answer however has yet emerged with approximately 40 of empirical papers finding a negative effect 40 finding no effect and 20 finding a positive effect does the literature taken together imply the existence of the so called natural resource curse in a quantitative survey of 605 estimates reported in 43 studies we find that overall support for the resource curse hypothesis is weak when potential publication bias and method heterogeneity are taken into account our results also suggest that four aspects of study design are especially effective in explaining the differences in results across studies 1 controlling for institutional quality 2 controlling for the level of investment activity 3 distinguishing between different types of natural resources and 4 differentiating between resource dependence and abundance

exporting recessions international links and the business cycle abstract empirical evidence of decoupling typically focuses on declining business cycle correlations at low frequencies at higher frequencies business cycles strongly co move during recessions but are largely independent during non recessionary periods

oil price shocks income and democracy he effect of natural resource wealth and income on political institutions is a central issue at the intersection of economics and political sciences we contribute to this research by examining the effect of international oil price fluctuations on democratic institutions over the 1960 2007 period we also exploit the very persistent response of aggregate income to oil prices to study the effect of persistent oil price driven income shocks on democracy our results indicate that countries with greater net oil exports over gdp see improvements in democratic institutions following upturns in international oil prices for example positive oil price shocks lead to improvements in the polity democracy score as well as the subscores for executive constraints executive recruitment and political competition and a higher probability of a democratic transition we estimate that an oil price driven 1 percentage point increase in per capita gdp growth increases the polity democracy score by around 0 2 percentage points on impact and by around 2 percentage points in the long run the effect on the probability of a democratic transition is around 0 4 percentage points our work relates to the literature on the link between political institutions and natural resource wealth and income an influential early contribution is lipset 1959 who documents that high income countries tend to be more democratic he argues that this positive correlation arises because higher per capita income is a symptom of the modernization of society and that modernization also increases citizens demand for political participation the positive association between income and democracy has also been emphasized by huntington 1991 who holds that higher per capita income was one of the key factors behind the

savings growth and the resource curse hypothesis an important connection between recent attempts to understand the determinants of economic growth and the measurement of sustainability is the finding of a negative and significant relationship between natural resource abundance and economic growth this is the so called resource curse hypothesis using cross country regressions we offer evidence that the curse may itself be a manifestation of the inability of governments to manage large resource revenues sustainably in particular these results offer another perspective on the resource curse hypothesis the countries where growth has lagged are those where the combination of natural resource macroeconomic and public expenditure policies have led to a low rate of genuine saving net saving adjusted for resource depletion

business cycles synchronicity and income levels has globalisation brought us closer than ever research on business cycle linkages shows a tendency to model countries of relatively the same income levels jointly however the issue of whether these countries move along the same business cycles has not been formally investigated in the literature in this paper we take this approach and investigate whether each group of countries follows its own dynamics and is therefore subjected to the same business cycle and whether these cycles are independent of each other across income groups results indicate that high income per capita countries hics tend to be guided by stronger similarity in business cycles than countries in the middle mics and low income lics groups in search for an explanation of the business cycles synchronicity observed panel data analysis was explored the results from the robust fixed effects estimation show neither trade openness nor shocks to consumption underlie international business cycle synchronization but rather shocks to oil prices

dutch disease and the oil boom and bust this paper examines the impact of the oil price boom in the 1970s and the subsequent bust on non oil economic activity in oil dependent countries during the boom manufacturing exports and output increased significantly relative to non oil countries these measures decreased gradually during the bust and subsequent period of low prices displaying a positive relationship with oil prices however exports of agricultural products sharply decreased during the boom imports of all types of goods displayed strong pro cyclicality with respect to oil prices the results suggest that increased local demand and investment spillovers from the windfall resulted in increased manufacturing activity

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

history lessons institutions factor endowments and paths of development in the new world the explanations offered for the contrasting records of long run growth and development among the societies of north and south america most often focus on institutions the traditional explanations for the sources of these differences in institutions typically highlight the significance of national heritage or religion we in contrast argue that a hemispheric perspective across the wide range of colonies established in the new world by the europeans suggests that although there were many influences factor endowments or initial conditions had profound and enduring effects on the long run paths of institutional and economic development followed by the respective economies

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

natural resources rent seeking and welfare abstract a new and very simple mechanism to explain why natural resource abundance may lower income and welfare is developed in a model with rent seeking a greater amount of natural resources increases the number of entrepreneurs engaged in rent seeking and reduces the number of entrepreneurs running productive firms with a demand externality it is shown that the drop in income as a result of this is higher than the increase in income from the natural resource more natural resources thus lead to lower welfare

what goes up must come down the recent economic cycles of the four most oil and gas dominated states in the us abstract the recent boom and bust in the us oil and natural gas sector provide a unique opportunity to assess whether the impacts of energy development are symmetric across the differing phases of the energy cycle this study uses the synthetic control method to examine the boom and bust effects for the four most oil and gas dominated states louisiana north dakota oklahoma and wyoming the four states are chosen as case studies because of their status as top oil and gas producers and the stronger influence of the oil and gas sector on their overall economies the results reveal differing employment impacts across the four states in both the short and long run and asymmetry during the boom and bust phases variation in the overall impacts and asymmetry of impacts across the boom bust cycle are suggested to be at least in part connected to state and local government expenditures

impact of vat reform on swedish restaurants a synthetic control group approach var analys av den sankta restaurangmomsen visar pa positiva effekter pa lonesumma omsattning anstallningar rorelsemarginaler och foretagsstocken resultaten visar tydligt att foretagen har valt

increasing returns and the genesis of american resource abundance the usa became the world s leading mineral producing nation between 1870 and 1910 a development paralleled by the rising resource intensity of american manufacturing this paper challenges the premise that resource abundance simply reflected the country s geological endowment of mineral deposits instead in the century following 1850 the usa exploited its natural resource potentials to a far greater extent than other countries and did so across virtually the entire range of industrial minerals the paper argues that natural resource abundance was an endogenous socially constructed condition that was not geologically preordained it examines the complex legal institutional technological and organizational adaptations that shaped the us supply responses to the expanding domestic and international industrial demands for minerals and mineral products it suggests that strong positive feedbacks even in the exploitation of depletable resources were responsible for the explosive growth of the american minerals economy

mode locking and international business cycle transmission abstract we investigate international business cycle synchronization business cycles in many countries have a tendency to synchronize with one another in what appears to be a world business cycle yet researchers find that trade and capital linkages are not strong enough for one country to drive business cycles in another country how is this world business cycle formed this study suggests that the world business cycle results from a mode locking phenomenon a nonlinear process by which weak coupling between oscillating systems tends to synchronize oscillations in the systems simulations and econometric analyses are performed to attempt to verify this hypothesis

the transmission of disturbances under alternative exchange rate regimes with optimal indexing the paper develops a general stochastic macroeconomic model that can be used to study the international transmission of disturbances under four alternative exchange rate systems uniform flexible exchange rates uniform fixed exchange rates and two versions of two tier exchange rates the analysis makes two general points first one cannot assume stability of structure when assessing the consequences of alternative exchange rate regimes for example the slope of the aggregate supply curve and the rationally formed expectations in the asset markets can respond dramatically to the government s choice of exchange rate regime second exchange rate regimes that provide full insulation from foreign disturbances may nevertheless be inferior to other regimes in terms of their ability to maximize social welfare

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

the resource curse exorcised evidence from a panel of countries abstract this paper evaluates the impact of major natural resource discoveries since 1950 on gdp per capita using panel fixed effects estimation and resource discoveries in countries that were not previously resource rich as a plausibly exogenous source of variation i find a positive effect on gdp per capita levels following resource exploitation that persists in the long term results vary significantly between oecd and non oecd treatment countries with effects concentrated within the non oecd group i further test gdp effects with synthetic control analysis on each individual treated country yielding results consistent with the average effects found with the fixed effects model

ownership risk investment and the use of natural resources the effect of insecure ownership on ordinary investment and natural resource use is examined insecure ownership is postulated to depend on the type of government regime in power and the prevalence of political violence or instability the political determinants of economy wide investment are estimated from cross country data and the results are used to form an index of ownership security when introduced into empirical models of natural resource use this index has a significant and quantitatively important effect on the use of forests and petroleum contrary to conventional wisdom ownership risk slows resource use in some circumstances

learning by doing and the dutch disease this paper develops a model of learning by doing and the dutch disease that extends the earlier literature in two ways first it is assumed that both the traded and the non traded sector can contribute to learning second it is assumed that there are learning spillovers between the sectors it is shown that within such a model a foreign exchange gift results in a real exchange rate depreciation in the long run due to a shift in the steady state relative productivity between the traded and the non traded sector in contrast to standard models of the dutch disease production and productivity in both sectors may go up or down the conditions for the different cases are worked out

modeling fluctuations in the global demand for commodities it is widely understood that the real price of globally traded commodities is determined by the forces of demand and supply one of the main determinants of the real price of commodities is shifts in the demand for commodities associated with unexpected fluctuations in global real economic activity

voting for protection an electoral model of tariff policy politicians want to please their constituents and will attempt to manipulate trade policy to further this goal this article elaborates a model of the electoral incidence across congressional districts of the interindustry structure of tariff protection with an application to the mckinley tariff of 1890 it may contribute to a neglected area of research on the domestic politics of tariffs to the history of a period of tariff formation in which there has been little recent work and to the debate over legislative representation of constituency interests models of the domestic political market for trade policy endogenous tariff theory can be divided into four categories with classification based on whether they are formal or empirical and on whether they focus on the demand or the supply side of the political market many of the formal models are too abstract to produce readily testable propositions 1 wolfgang mayer s model for example assumes that tariffs are set by a national popular referendum and deduces tariff structures from median voter results 2 there is no government in this type of model the demanders and suppliers of policy are the same william brock and stephen magee s model assumes a singleissue election in which politicians bid for votes by offering tariff protection up to the point at which marginal gains votes plus campaign contributions equal marginal costs lost votes plus lost contributions 3

cointegrating institutions the time series properties of country institutional measures abstracta country s political and economic institutions are critical for economic prosperity the literature abounds with institutional measures precisely because institutions are multidimensional we use panel unit root and cointegration tests to examine the time series properties of several institutional measures to answer two questions first do institutional changes tend to be permanent second which subsets of institutions tend to converge or move together these answers have important implications for whether permanent institutional reform is possible and whether reforms can be undertaken one institutional area at a time or instead must simultaneously encompass multiple institutional areas

kleptocracy and divide and rule a model of personal rule many developing countries have suffered under the personal rule of kleptocrats who implement highly inefe cient economic policies expropriate the wealth of their citizens and use the proceeds for their own glorie cation or consumption we argue that the success of kleptocrats rests in part on their ability to use a divide and rule strategy made possible by the weakness of institutions in these societies members of society need to cooperate in order to depose a kleptocrat yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move and redistributing the benee ts to those who need to agree to it thus the collective action problem can be intensie ed by threats which remain off the equilibrium path in equilibrium all are exploited and no one challenges the kleptocrat kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents when opposition groups are shortsighted when the average productivity in the economy is low and when there is greater inequality between producer groups because more productive groups are more dife cult to buy off jel o12 h00

evaluating the economic effects of flat tax reforms using synthetic control methods tax reforms are often motivated by their potential to improve economic performance however their actual impacts are difficult to quantify we analyze the impact of flat tax reform on incomes using synthetic control methods we identify the eight eastern and central european countries that adopted flat tax systems between 1994 and 2005 and then compare post reform gdp per capita of treated countries with a convex combination of similar but untreated countries while accounting for the time varying impact of unobservable heterogeneity we find positive impacts in all eight countries with seven out of eight cases significant at the conventional level

more oil less democracy evidence from worldwide crude oil discoveries this article exploits variations in the timing and size of oil discoveries to identify the impact of oil wealth on democracy i find that discovering 100 billion barrels of oil approximately the initial endowment of iraq pushes a country s democracy level almost 20 percentage points below trend after three decades the estimated effect is larger for oilfields with higher quality oil and lower exploration and extraction costs however the estimates become less precise when oil abundance is measured by oil discovery per capita suggesting politicians may care about the level instead of the per capita value of oil wealth

studying the role of political competition in the evolution of government size over long horizons here we argue for the use of cointegration and error correction analysis to combine economic factors that are nonstationary with political factors that are stationary into an empirical model of the evolution of public policy over long periods the approach is applied to disentangle the contributions of economics and politics to the evolution of public expenditure by the government of canada over 130 years political competition emerges as the primary political factor affecting government size

the textile bill of 1985 the determinants of congressional voting patterns the following tables show the results of the probit analysis for the senate and the house a table including results for different combinations of the independent variables is included in an unpublished appendix available from the authors upon request the results of the probit analysis for the senate are shown in table 1 all the variables except exp had the expected signs however the results indicate that the two other employment variables and party affiliation are the only factors which we can say with confidence influenced a senator s decision to vote for or against this bill the coefficients reported and labeled der of prob measure the derivative of the probability of a yes vote evaluated at the means of the independent variables in question thus for example the coefficient for unemp in the top line of table 1 should be interpreted as indicating that a one percentage point increase in a state s unemployment rate will cause a 5 89 increase in the probability that the senator will vote for the bill the result for dr the party of the senator shows that in general democrats are more apt to vote for protectionist policies than are republicans this is consistant with president reagan s negative stand on the bill and his threat to veto it should it pass the amendment in question passed the senate on 24 october 1985 by a vote of 54 for to 42 against but the bill it was attached to has been postponed indefinitely the house bill which was passed on 10 october 1985 by a vote of 262 for to 159 against was vetoed by reagan on 17 december 1985 the results of the probit analysis for the house of representatives are shown in table 2 state employment data was used for the house as opposed to data for each voting district this was done for three reasons first employment data is usually reported by state or by county since counties are often divided by congressional district boundaries much personal judgement would be necessary to assign employment figures second the most recent county industry employment data is from 1981 while the data used in this analysis is from 1984 third we feel that in general logrolling is prevalent among a state s representatives for this bill the representatives from twenty six states voted as a block and in all but six states one third or less of that state s representatives voted contrary to the majority all of the probabilities are significant at the 05 confidence level representative s voting patterns are influenced by all of the included factors when unionization is added to the equation its coefficient is very small and negative although it is significant at the 05 confidence level one would expect more significance here since there are more degrees of freedom for the house analysis than for that of the senate when the data from the house and senate are pooled the results are similar to those of the house alone the null hypothesis that the data cannot be pooled was tested using a statistic with eight degrees of freedom 9 721 meaning that the null hypothesis is rejected as in the senate the state unemployment rate and the percent employed in textiles are important influences on the representative s vote and democrats in the house are more likely to vote for protectionist bills than republicans however unlike the senate the percent of a representative s campaign contributions that are donated by industry special interest groups has a significant effect on voting patterns although the point estimates for the magnitudes of the influence are very similar in both cases seventy four percent of the house received campaign contributions from these special interest groups while only 54 of the senate received contributions from these same sources this is probably because only one third of the senate was up for reelection during the time period considered while the entire house was in the process of campaigning for reelection exports also play a role in influencing the probability of a yes vote reducing this probability as employment in export industries increases but the magnitude of the coefficient is only 11 of that for textile employment the significance of this variable in the house is probably due to fear of retaliation expressed by both democrats and republicans this variable was not significant in the senate model most likely because the senate version excluded from the 1 import quota growth rate many countries who might have retaliated representatives appear to respond to a wider variety of constituent interests than do senators while senators voting patterns are only significantly influenced by their political affiliation their state s unemployment rate and the importance of textiles to their state the voting behavior of representatives is influenced by these factors as well as the importance of exports to their state and campaign contributions by textile special interest groups these results affirm the validity of the approach used by baldwin and coughlin they differ from baldwin who finds exports are not a significant influence on the house and from coughlin who does not include export employment as an explanitory variable or analyze the differences in voting patterns between the house and the senate

economic backwardness in political perspective government policies and institutions shape economic incentives and via this channel have a first order impact on economic development why then do many societies adopt policies that discourage investment and maintain institutions that cause economic backwardness perhaps politically powerful groups elites are not in favor of economic growth but why it would appear that economic growth would provide more resources for these groups to take over or tax increasing their economic returns so why don t powerful groups always support economic development in this paper we develop a theory of inefficient government policies and institutions all else equal politically powerful groups would welcome superior institutions and technologies but in practice all else is not equal because superior institutions and technologies may reduce their political power and make it more likely that they will be replaced at the center of our theory is therefore the idea that changes in institutions or the introduction of new technologies often create turbulence eroding the political advantages and future economic rents of incumbent elites alternatively new technologies may enrich competing groups increasing their threat to incumbents these considerations make politically powerful groups fear losing power and oppose economic and political change even when such change will benefit society as a whole to understand the mechanism at work and its potential applications consider a concrete example industrialization in the nineteenth century bairoch 1982 estimates that between 1830 and 1913 world manufacturing output increased by a factor of 5 see table 1 panel a nevertheless this process was highly uneven across regions and countries bairoch also calculates that over the same period manufacturing output in developed countries europe and north america increasedbyafactorofover10 whereasitdeclinedinthe third world among developed countries there were

political foundations of the resource curse in this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse we show 1 politicians tend to over extract natural resources relative to the efficient extraction path because they discount the future too much and 2 resource booms improve the efficiency of the extraction path however 3 resource booms by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections increase resource misallocation in the rest of the economy 4 the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create countries without such institutions however may suffer from a resource curse

domestic content legislation house voting and the economic theory of regulation house voting on domestic content legislation provides a rare opportunity to examine the political economy of protectionism with respect to a particular issue rather than by using the traditional interindustry approach the results indicate that a representative s vote in favor of the content legislation and the intensity of the legislator s preferences are positively related to the importance of the auto and steel industries in the representative s district an increasing unemployment rate campaign contributions from labor groups affiliation with democratic party and a liberal ideology despite ideology s statistical significance the results suggest this variable can be disregarded because neither the predictive accuracy nor the explanatory power of the model is improved by its inclusion the estimates also provide insights concerning the impact of changes in the independent variables upon voting patterns

understanding the evolution of world business cycles abstract this paper studies the changes in world business cycles during the period 1960 2003 we employ a bayesian dynamic latent factor model to estimate common and country specific components in the main macroeconomic aggregates output consumption and investment of the g 7 countries we then quantify the relative importance of the common and country components in explaining comovement in each observable aggregate over three distinct time periods the bretton woods bw period 1960 1 1972 2 the period of common shocks 1972 3 1986 2 and the globalization period 1986 3 2003 4 the results indicate that the common g 7 factor explains on average a larger fraction of output consumption and investment volatility in the globalization period than it does in the bw period

trade interdependence and the international business cycle a stochastic general equilibrium model of the world economy is developed to analyze the contribution of trade interdependence to international business cycles we test some of the implications of the model using data from ten major industrial countries and a variety of detrending techniques to calculate the cyclical component of output we find that the significance of trade in the transmission of economic disturbances across countries is not robust to the choice of the detrending method in general the role of trade interdependence is moderate and seem to have been stronger in the period before 1973

sources and propagation of international output cycles common shocks or transmission abstract this paper studies the generation and transmission of international cycles in a multi country model with production and consumption interdependencies two sources of disturbance are considered and three channels of propagation are compared technology disturbances which are mildly correlated across countries are more successful than government expenditure disturbances in reproducing actual data the presence of a common component to the shocks and of production interdependencies appear to be crucial in quantitatively matching the properties of the data

how do the trans pacific economies affect the usa an industrial sector approach this paper studies how the trans pacific region affects the us economy in terms of business cycle transmission we use a large data set consisting of disaggregated sectoral industrial production indexes from selected countries in the region and employ a factor augmented vector autoregression favar approach to analyse the transmission of shocks in different industries we find that a positive output shock in the entire trans pacific region has positive effects on the majority of us manufacturing sectors we also find that sectoral shocks in five sectors of the trans pacific region have a large impact on the overall us economy three of the five sectors displayed strong same sector responses relative to the overall response suggesting that vertical production linkages might play a key role in the transmission of shocks our results highlight the importance of examining industrial sectors in studying the transmission of shocks in the trans pacific region

international interdependence and business cycle transmission between turkey and the european union 1 introduction because of globalization and the asian financial crisis interest in the international linkages and economic comovements between different regions of the world has recently heightened one economic relationship of particular interest is the relationship between turkey and its european neighbors this relationship is important because of turkey s european orientation and because of turkey s long held ambition of joining the european union eu in view of this situation we examine the linkages and comovements of outputs prices interest rates and money supplies between turkey and europe the main question we address here is do the turkish and european economies move together through time that is are their business cycles synchronized three related questions are how or why does this synchronization or comovement take place is there any evidence of business cycle transmission between the european economies and turkey have these comovement relationships changed over time to address these questions we gathered statistics on macroeconomic variables trade linkages capital flows and historical economic events for most of the analysis germany turkey s largest trading partner is used as a proxy for the eu nations because of the limited period of availability of the quarterly data we examine the relationship using both annual and quarterly data using annual data for 1956 1998 and quarterly data for a shorter period from the first quarter of 1981 through the fourth quarter of 1998 we calculate correlations between macroeconomic variables for turkey and germany and perform principal components analysis tests of cointegration and granger causality and a structured vector autoregression svar impulse response analysis using the method of bernanke 1986 and sims 1986 the synchronization issue is investigated through the use of the graphs correlations and principal components analysis the transmission issue is investigated through the use of the granger causality tests and svar impulse response analysis our results show that the business cycle patterns of turkey and europe are quite different indeed in some cases they appear to be almost 180 out of phase in many cases the correlations between the real growth rate of turkey and those of the eu countries are statistically insignificant principal components analysis reveals a large difference between fluctuations in turkey and those in the eu countries associated regressions also show a surprisingly insignificant relationship between the real gdp growth rates for turkey and the eu and between those for turkey and germany however the svar impulse response analysis reveals a modest positive transmission from germany to turkey our conclusion is that although turkey and europe will obviously both benefit from participation in a free trade relationship with each other see harrison rutherford and tarr 1997 because of the absence of synchronization between turkey and the eu it appears that turkey would incur serious stabilization costs if it were to participate in the european monetary union in addition to the transaction benefits of participating in an optimal currency area there are economic stability losses incurred by a country joining an optimal currency area economic costs arise because a country joining an optimal currency area loses its ability to implement an independent exchange rate and monetary policy for income and unemployment stabilization see krugman and obstfeld 2000 hence countries out of sync with the rest of the countries in the group will be continuously affected by inappropriate monetary policy turkish business cycle fluctuations do not display the similarity with european business fluctuations that would make it beneficial for turkey to be a part of the european monetary union at this time 1 on the other hand dissimilarity in business cycles might make it profitable for european investors to invest in turkey for purposes of diversification

identifying the common component of international economic fluctuations a new approach in this paper we develop an aggregation procedure using time varying weights for constructing the common component of international economic fluctuations the methodology for deriving time varying weights is based on some stylised features of the data documented in the paper the model allows for a unified treatment of cyclical and seasonal fluctuations and also accommodates the dynamic propagation of shocks across countries we find evidence for a world business cycle as well as evidence for a distinct european common component we also find some evidence that macroeconomic fluctuations have become more closely linked across industrial economies in the period after 1973 the world economy has become more closely integrated in recent years due to increasing trade and financial flows across countries this has spurred interest in the question of how the ongoing phenomenon of globalisation has affected the transmission and propagation of business cycle fluctuations across national borders an important question in this context is whether a substantial fraction of economic fluctuations are country specific or if there exists a world business cycle which might be defined as fluctuations that are common across all countries more generally the comovement of macroeconomic aggregates across different countries has become a topic of increasing interest in both academic and policy circles these issues have implications in a number of dimensions an empirical analysis of the relative importance of country specific versus common international fluctuations is of relevance for determining the structure of certain classes of international business cycle models from a policy perspective strong comovement of output across countries at business cycle frequencies implies that external trade would be unlikely to play a significant role in dampening fluctuations domestic policies aimed at affecting the real exchange rate and thereby attempting to boost net exports in the short run would then tend to have limited impact the degree of synchronisation of business cycles across countries also has important implications for short run international policy coordination and for assessing the feasibility of monetary unions therefore identifying and analysing the common component of international economic fluctuations is relevant from a number of different perspectives

mining away the preston curve summary i estimate the long term national health and education impacts of having a larger mining share in the economy by instrumenting the relative size of the mining sector with the natural geological variation in countries fossil fuel endowments i provide evidence suggestive of a causal relationship the findings suggest that countries with larger mining shares tend to have poorer health and education outcomes than countries with similar per capita incomes geographic characteristics and institutional quality doubling the mining share of an economy corresponds to on average the infant death rate being 20 higher life expectancy being 5 lower total years of education being 20 lower and 70 more people having no formal education divergences from the preston curve the concave relationship between cross country income and life expectancy that has long been of interest to economists demographers and epidemiologists are thus partly explained by the size of the mining sector within country evidence from indonesia paints a similar picture my results provide support for a growing body of evidence linking mining to poorer average living standards particularly vis a vis other types of income i also estimate the effects of national mining dependence on non mining income health and education investment and institutions

the long run effects of oil wealth on development evidence from petroleum geology we estimate the long run effects of oil wealth on development by exploiting spatial variation in sedimentary basins areas where petroleum can potentially form instrumental variables estimates indicate that oil production impedes democracy and fiscal capacity development increases corruption and raises gdp per capita without significantly harming the non resource sectors of the economy we find no evidence that oil production increases internal armed conflict coup attempts or political purges in several specifications failure to account for endogeneity leads to substantial underestimation of the adverse effects of oil suggesting that countries with higher quality political institutions and greater fiscal capacity disproportionately select into oil production