an appraisal of alternative blueprints for international policy coordination this paper examines two schemes for the international coordination of macroeconomic policy using a world econometric model the national institute global econometric model the first is the extended target zone scheme proposed by j williamson and m miller 1987 which involves targeting fundamental equilibrium exchange rates using monetary policy and using fiscal policy to control domestic demand the second uses fiscal policy to target the current account and monetary policy to stabilize domestic demand both schemes are parameterized using optimal control techniques on the national institute global econometric model and the welfare gains in using these schemes compared to historical experience from 1974 to 1986 are assessed

will digital technologies transform agriculture in developing countries mobile phones and the internet have significantly affected practically all sectors of the economy and agriculture is no exception building on a recent world bank flagship report this article introduces a concise framework for describing the main benefits from new information and communication technologies they promote greater inclusion in the broader economy raise efficiency by complementing other production factors and foster innovation by dramatically reducing transaction costs the article reviews the recent literature on corresponding technology impacts in the rural sector in developing countries digital technologies overcome information problems that hinder market access for many small scale farmers increase knowledge through new ways of providing extension services and they provide novel ways for improving agricultural supply chain management while there are many promising examples of positive impacts on rural livelihoods or digital dividends these have often not scaled up to the extent expected the main reason is that technology can always only address some but not all of the barriers faced by farmers in poorer countries

exchange rate behaviour under the ems regime was there any systematic change abstract most empirical studies fail to detect any systematic effects of the ems regime on the economic performance of member countries this reveals the difficulty of constructing controlled experiments which can distinguish what is due to the ems from that due to common external pressures we argue that the crucial step is to examine the exchange rates distribution since no performance improvements will appear if exchange rate behaviour does not change within the ems we find that there are changes in the third and fourth moments which imply that ems currencies have become more fragile and susceptible to shocks particularly negative shocks relative to non ems currencies

inflexible rules in incentive problems in practice contracts involve standard terms or rules allowing for variations only under exceptional circumstances we develop a simple model in which optimal contracts display this feature even in the absence of transactions costs rules arise when an agent has countervailing incentives to misrepresent private information these incentives are created by endowing the agent with a critical factor of production ex ante applications in regulatory labor and legal settings

the international monetary system an analysis of alternative regimes abstract this is an exercise in the positive economics of alternative monetary regimes the behavior of output and prices is compared using a stochastic specification which allows asymptotic variances to be obtained without difficulty free floating of exchange rates together with national money supply targets is analyzed first with and without the presence of fads in the exchange rate two alternatives for monetary coordination are then considered first is mckinnon s proposal to fix nominal exchange rates and stabilize aggregate monetary growth or average inflation second is williamson s system of target zones for stable real exchange rates complemented by nominal income targets for fiscal policy

screening in a matching market contract design under incomplete information is often analysed in a bilaterally monopolistic setting if the informed party s reservation value does not depend on its private information its type it is a standard result that the uninformed side offers low types distorted contracts to reduce the information rent left to high types we challenge this result by embedding contract design in a matching market environment we consider a market where players meet pairwise and where in each match either side may be chosen to make a take it or leave it offer as frictions become sufficiently low we find that the set of equilibria is independent of whether there is complete or incomplete information in particular all contracts are free of distortions

capital controls and balance of payments crises abstract the theory of balance of payments crises shows that under perfect foresight a system of fixed exchange rate is not sustainable in the presence of diverging economic policies in this paper it is shown how and why capital controls succeed in maintaining the principle of a fixed but adjustable parity both cases of a devaluation and a revaluation are considered and a condition for a parity change to be credible is presented

competitive price discrimination we model firms as supplying utility directly to consumers the equilibrium outcome of competition in utility space depends on the relationship u between profit and average utility per consumer public policy constraints on the deals firms may offer affect equilibrium outcomes via their effect on u f rom this perspective we examine the profit utility and welfare implications of price discrimination policies in an oligopolistic framework we also show that an equilibrium outcome of competitive nonlinear pricing when consumers have private information about their tastes is for firms to offer efficient two part tariffs

the fourth industrial revolution agricultural and rural innovation and implications for public policy and investments a case of india the indian government and public private partnerships are developing and disseminating a dizzying number of innovative networked solutions broadly known as the digital india initiative to increase the efficiency of safety nets and worker productivity and to improve life yet challenges to turn the power of information and other technologies into a farmer friendly technological revolution for india s 156 million rural households are considerable including 1 reliable up to date location specific message content for a diverse agriculture to help stratified households shift to productive knowledge intensive agriculture as a business government private sector and civil society have big roles to play 2 digital literacy i e teaching farmers how to choose and use apps even where the digital divide is absent apps are or soon to be in regional languages and 3 monitoring actual use and impacts on users lives by understanding the adoption and adaptation processes these challenges call for bottom up complementary investments in physical human and institutional capital and farmer friendly e platforms while forging ahead with many top down policy and institutional reforms currently underway in which progress is real and constraints holding back greater success are better understood this article is protected by copyright all rights reserved

policy bargains and the problem of model selection abstract parameter uncertainty and disagreements about model specification pose a particular difficulty for economic policy design frankel and rockett argue that if model uncertainty is not explicitly taken into account policy coordination is as likely to decrease welfare as increase it this paper therefore looks at the scope for reducing errors by making strategic model choices part of the overall policy selection procedure it shows that alternative definitions of the policy bargain produces decisions which are robust against disagreements about the correct model while alternative choices of model produce policies which are robust against model uncertainty hence fixed i e model free policy rules are no substitute for making strategic model choices

dynamic bargaining in a supply chain with asymmetric demand information we analyze a dynamic bargaining game in which a seller and a buyer negotiate over quantity and payment to trade for a product both firms are impatient and they make alternating offers until an agreement is reached the buyer is privately informed about his type which can be high or low the high type s demand is stochastically larger than the low type s in the dynamic negotiation process the seller can screen whereas the buyer can signal information through their offers and the buyer has an endogenous and type dependent reservation profit with rational assumptions on the seller s belief structure we characterize the perfect bayesian equilibrium of the bargaining game interestingly we find that both quantity distortion and information rent may be avoided depending on the firms relative patience and the seller may reach an agreement with either the high type or the low type first or with both simultaneously furthermore we explore our model to characterize the effect of demand forecasting accuracy on firm profitability we find that improved demand forecast benefits the buyer but hurts the seller when the buyer s forecasting accuracy is low however once the buyer s forecasting accuracy exceeds a threshold both firms will benefit from further improvement of the forecast this observation makes an interesting contrast to previous findings based on the one shot principal agent model in which improvement of forecasting accuracy mostly leads to a win lose outcome for the two firms and the buyer has an incentive to improve his forecasting accuracy only when it is extremely low this paper was accepted by yossi aviv operations management

measuring agricultural knowledge and adoption understanding the trade offs in improving the precision of agricultural measures through survey design is crucial yet standard indicators used to determine program effectiveness may be flawed and at a differential rate for men and women the authors use a household survey from mozambique to estimate the measurement error from male and female self reports of their adoption and knowledge of three practices intercropping mulching and strip tillage despite clear differences in human and physical capital there are no obvious differences in the knowledge adoption and error in self reporting between men and women having received training unanimously lowers knowledge misreports and increases adoption misreports other determinants of reporting error differ by gender misreporting is positively associated with a greater number of plots for men recall decay on measures of knowledge appears prominent among men but not women findings from regression and cost effectiveness analyses always favor the collection of objective measures of knowledge given the lowest rate of accuracy for adoption was around 80 percent costlier objective adoption measures are recommended for a subsample in regions with heterogeneous farm sizes

renegotiation and optimality in agency contracts we analyse renegotiation in a hidden action principal agent model contract renegotiation offers are made by the agent a refinement is imposed on the principal s beliefs if precisely one action is optimal with respect to both the principal s and the agent s contracts the principal believes that that action has been taken with the refinement imposed perfect bayesian equilibrium allocations are identical to the second best in the classical principal agent model without renegotiation when renegotiation is led by the agent and when equilibria satisfy the refinement equilibrium allocations are ex ante efficient incentive contracting is a common mechanism for promoting ex ante investments and for avoiding ex post opportunistic behaviour in a long term or continuing economic relationship the classical principal agent model holmstrom 1979 grossman and hart 1983 is a natural framework for this class of problem in such a model a risk averse agent performs an action on behalf of a risk neutral principal the agent s action is unobservable and affects the principal s revenue in a random fashion the derivation and characterization of efficient compensation schemes have been the major focus in the principal agent literature generally the incentives to motivate a costly action from the agent take the form of profit sharing the agent s reward is made contingent on his random performance outcomes

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

fiscal leadership and central bank design this article investigates the impact on economic performance of the timing of moves in a policy game between the government and the central bank for a government that has both redistributional and stabilization objectives it is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared with a regime in which monetary and fiscal policy are determined simultaneously further it is shown that government leadership benefits both the fiscal and monetary authorities through the enhanced coordination that this arrangement implies jel classification e52 e61 f42

participation constraints in adverse selection models abstract this paper characterizes the optimal contract offered by an uninformed principal to an informed agent when the latter s reservation utility depends on his type the informational rent is nonmonotonic so that interior types may have a vanishing rent or be excluded from trade the paper identifies conditions for the optimal contract to be separating to be nonstochastic and to induce full participation it also discusses the nature of the solution when bunching occurs the results are applied to nonlinear pricing under price cap regulation and bypass competition and to competition in nonlinear pricing journal of economic literature classification numbers d82 d42 d23 d78 l51 l15

hold up in vertical hierarchies with adverse selection this paper studies bargaining with hold up in presence of adverse selection and endogenous type distribution with limited liability for the agent quantities of first best are not socially optimal the allocation of bargaining power is never completely in favor of one party

gold monetization and gold discipline gold and its price have emerged as frequent topics of both academic and government debate 2 public attention focused on the gold market since gold s price began fluctuating violently in 1980 and 1981 has turned to gold as a possible means of removing some discretion inherent in the current fiat money system since lack of adherence to monetary rules can lead to problems of dynamic policy inconsistency academic economists have begun seriously to reconsider monetary standards based either on gold or on some other commodity as politically feasible methods of establishing rules 3

the advantage of tying one s hands ems discipline and central bank credibility abstract it is often argued that the ems is an effective disciplinary device for inflation prone countries in europe since it forces the respective policy makers to pursue more restrictive monetary policies than they would otherwise it is not clear however why these countries should submit themselves to such discipline this paper argues that to answer this question appropriately one must consider that ems membership brings potentially large credibility gains policy makers in inflation prone countries the reason is that not only it attaches an extra penalty to inflation in terms of real appreciation but makes the public aware that the policy maker is faced with such penalty and thus helps to overcome the inefficiency stemming from the public s mistrust of the authorities

target zones and international policy coordination the contrast between the necessary and sufficient conditions for success abstract this paper distinguishes between the necessary and sufficient conditions for adopting exchange rate target zones for improving macroeconomic performance the necessary conditions are easily satisfied but it is much more difficult to design a targetting system which satisfies the sufficient conditions when the exchange rate is an intermediate target on that criterion the gains may be smaller than previously estimated however target zones have important practical advantage they are effective in promoting stability and as a simple but uncontroversial way of securing the coordination necessary to prevent policy makers adopting inefficient or competitive policies

a complete solution to a class of principal agent problems with an application to the control of a self managed firm this paper considers a class of principal agent problems which have the following features 1 there is adverse selection because the principal ignores the value of one parameter of the agent s true characteristics 2 leaving aside the information parameter the principal s welfare as well as the agent s welfare depend on two types of variables observable to both of them the first ones possibly multidimensional are called action variable s and the second one which is one dimensional has in general the meaning of a money transfer 3 the principal is a stackelberg leader of the two person game he can commit himself to decision rules which are admissible on informational grounds he optimizes within the adequate class taking into account besides the agent s reaction one constraint which has generally the meaning of an individual rationality constraint and sometimes of a feasibility constraint the optimization is limited to the class of non stochastic mechanisms 4 the problem can also receive an alternative interpretation the principal faces a continuum of agents of unknown characteristics the distribution being known however stylized principal agent problems of this type have often been considered in the economic literature in particular the reader will later be able to recognize that the standard income tax model a la mirrlees 1971 the quality or quantity choice model of the monopolist a la mussa and rosen 1978 or maskin and riley 1982 and the model of government regulation of the private monopolist of baron and myerson 1982 all belong to

ict and agricultural productivity evidence from cross country data this article carries out agricultural production function estimations based on data for the period 1995 2000 on 81 countries to present empirical evidence on the relationship between the adoption of information and communication technology ict and agricultural productivity it is found that new ict has a significantly positive impact on agricultural productivity the evidence suggests that the adoption of modern industrial inputs in agricultural production relies on the information and communication infrastructure however the empirical evidence from this study also suggests that new ict could be a factor for the divergence between countries in terms of overall agricultural productivity not only do we find that the ict adoption levels of the richer countries are much higher than those of the poorer countries but also that returns from ict in agricultural production of the richer countries are about two times higher than those of the poorer countries a plausible explanation for the poorer countries relatively low productivity elasticity of ict is the lack of important complementary factors such as a substantial base of human capital

international policy design and the sustainability of policy bargains events of the past decade and the persistence of the worldwide recession have underlined the interdependence of the major economics competitive devaluations first illustrated the dangers of unilateral decisions and politicians have regularly called for concerted policies since the bonn economic summit in 1978 economic theory has shown that coordinated policies can bring gains but the question of whether those gains will be significant and how they will be distributed remains unanswered remarkably few empirical results on how interdependence should affect policy design or even on the signs of spillovers between economies have been produced this paper estimates the costs of uncoordinated policies to the us and eec economies and also the potential gains and risks in cooperation it focuses particularly on the process of determining rational policy bargains and whether in an international context such bargains are likely to be sustainable

on the imperfect substitutability of policy regimes exchange rate targetting vs policy coordination abstract exchange rate targetting is always an imperfect substitute for explicit policy coordination but succeeds when economies are either structurally dissimilar with symmetric shocks or structurally symmetric with dissimilar shocks a joint commitment then generates economies of scale in interventions

quality distortion by a discriminating monopolist the standard model of monopolistic imperfect quality discrimination involving consumer self selection has shown that no distortion occurs at the highest quality level while all lower quality levels are degraded in order to maintain profitable market segmentation this result flows from the assumption that consumers with a higher total utility of quality also have a higher marginal utility of quality the paper develops a reasonable model in which the standard assumption is not satisfied and this alternative model yields vastly different conclusions regarding the form of quality distortion in particular quality may be enhanced not degraded to maintain profitable market segmentation copyright 1989 by american economic association

contract design and bargaining power abstract it is a common assumption in contract theory that the uninformed side makes a take it or leave it proposal in contrast this paper explores a model which allows a shift in bargaining power continuously between the two parties endowing the informed side with more bargaining power gradually reduces distortions

posted pricing vs bargaining in sequential selling process we study the role of bargaining in a firm s sequential selling process the seller firm under consideration sequentially sells a fixed amount of stock to a random arrival stream of potential buyers who are heterogeneous in product valuation based on the stock level and the time to the end of the selling season the seller may dynamically choose either to post a take it or leave it price or to engage in bargaining with an arriving buyer we introduce a stochastic order called the scaled pricing order for the buyer s valuation distribution the scaled pricing order measures the average portion of trade surplus that the seller can obtain by posting a price for distributions with increasing length biased hazard rate checking the property of increasing decreasing scaled pricing order boils down to verifying the concavity convexity of the mills ratio we fully characterize the family of distributions that are invariant in the scaled pricing order which includes uniform and exponential distributions

is there too much hype about index based agricultural insurance abstract individual crop insurance has been largely abandoned in developing countries and replaced by insurance pilots based on weather indices these pilot schemes have encountered low demand research suggests that better off farmers may already be insured via income diversification their assets and social networks and may achieve profit maximising portfolios without formal insurance contracts they would be interested in such contracts only if they reliably reduced their exposure to risk at lower costs than their self insurance mechanisms conversely poor farmers are not able to self insure adequately have to trade off returns for reduced risk and could therefore benefit from a well designed insurance but they are cash credit constrained and therefore cannot advance the money before sowing time to buy insurance that pays out only after the harvest index insurance therefore cannot be scaled up even if a few farmers purchase it governments still will need to run relief programmes for the un