does economic recession reduce material use empirical evidence based on 157 economies worldwide abstract the research on economic recession has been more focused on the interactions between macroeconomic and financial variables however whether material use has been affected during the recession period has remained under explored in order to fill up this gap this study investigates the relationship between material use and economic recession as well as other socio economic drivers by using the material flow analysis and the system generalized method of moments for 157 economies worldwide during 1980 2011 results show that economic recession poses significant and negative impact on domestic material consumption at 1 level illustrating its role as a determinant factor on material mitigation by dividing the research sample into extractive and non extractive economies as well as high mid and low income groups we again confirmed the significant negative correlations as expected no significant sign is found between recession and physical trade balance besides other drivers such as population gross domestic production gdp per capita and technological variables also exert marked effects at different situations this research work provides an empirical study on how recession and other factors affect material use at various scenarios which have essential implications for understanding material flow dynamics in different economic cycles

foreign currency for long term investors conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk even if they hold foreign equities they should hedge the currency exposure of these positions and hold only domestic treasury bills this paper argues that the conventional wisdom may be wrong for long term investors domestic bills are risky for long term investors because real interest rates vary over time and bills must be rolled over at uncertain future interest rates this risk can be hedged by holding foreign currency if the domestic currency tends to depreciate when the domestic real interest rate falls empirically this effect is important

boom and bust cycles external imbalances and the real exchange rate when the current account balance and net capital outflows do not exactly offset each other international payment flows arise payment flows into a country push the real exchange rate up payment outflows push it down this article uses a model of optimal consumption and portfolio choice to determine the factors that drive international payment flows during boom and bust cycles it shows that during such episodes capital inflows first exceed the deficit on current account strengthening the currency later on when the return on domestic capital reverts to its normal level the current account recovers yet the overall decline of the net foreign asset position provokes a fall of the real exchange rate even below its initial level case studies of countries experiencing rapid economic expansions followed by economic and financial meltdowns confirm the article s theoretical predictions

capital controls capital flow contractions and macroeconomic vulnerability abstract in this paper i analyze whether restrictions to capital mobility reduce vulnerability to external shocks more specifically i ask if countries that restrict the free flow of international capital have a lower probability of experiencing a large contraction in net capital flows i use three new indexes on the degree of international financial integration and a large multi country data set for 1970 2004 to estimate a series of random effect probit equations i find that the marginal effect of higher capital mobility on the probability of a capital flow contraction is positive and statistically significant but very small having a flexible exchange rate greatly reduces the probability of experiencing a capital flow contraction the benefits of flexible rates increase as the degree of capital mobility increases a higher current account deficit increases the probability of a capital flow contraction while a higher ratio of fdi to gdp reduces that probability

the speculative attack on the peso and the real exchange rate argentina 1979 1981 abstract this article applies a speculative attack model to argentina during its pre announced exchange rate system from january 1 1979 to june 30 1981 the model attempts to verify a rule whereby if domestic credit growth exceeds the rate of currency depreciation two things occur first the domestic price of non traded goods rises relative to the price of traded goods second foreign reserves decline until a point when a sudden speculative attack depletes remaining reserves causes a precipitous fall in the relative price of non tradables and forces the country onto a floating exchange rate regime in some important respects the model captures the argentinian experience yet in other respects if fails to do so

crises and exchange rate regimes time to break down the bipolar view we revisit the link between crises and exchange rate regimes err using a panel of 90 developed and developing countries over the period 1980 2009 we find that corner err are not more prone to crises compared to intermediate err this finding holds for different types of crises banking currency and debt and is robust to a wide set of alternative specifications consequently we clearly break down the traditional bipolar view countries that aim at preventing crisis episodes should focus less on the choice of the err and instead implement sound structural macroeconomic policies

international portfolio flows and exchange rate volatility in emerging asian markets abstract this paper investigates the effects of equity and bond portfolio inflows on exchange rate volatility using monthly bilateral data for the us vis a vis seven asian developing and emerging countries india indonesia pakistan the philippines south korea taiwan and thailand over the period 1993 01 2015 11 garch models and markov switching specifications with time varying transition probabilities are estimated in addition to a benchmark linear model the evidence suggests that high low exchange rate volatility is associated with equity bond inflows from the asian countries toward the us in all cases with the exception of the philippines therefore capital controls could be an effective tool to stabilise the foreign exchange market in countries where flows affect exchange rate volatility

currency misalignments and growth a new look using nonlinear panel data methods the aim of this article is to investigate the link between currency misalignments and economic growth relying on panel cointegration techniques we calculate real exchange rate rer misalignments as deviations of actual rers from their equilibrium values for a set of advanced and emerging economies estimating panel smooth transition regression pstr models we show that rer misalignments have a differentiated impact on economic growth depending on their sign whereas overvaluations negatively affect economic growth rer undervaluations significantly enhance it this result indicates that undervaluations may drive the exchange rate to a level that encourages exports and promotes growth

what do twins share a joint probit estimation of banking and currency crises we study the determinants of twin crises and investigate the direction of causality between banking and currency crises in emerging markets we model banking and currency crises as dynamic events correlated over time and jointly estimate their probability using panel data simulation techniques we show that banking and currency crises are closely intertwined and are driven by common fundamentals banking crises exhibit strong state dependence suggesting that countries that have experienced a banking crisis in the past are more prone to experience another crisis finally we find evidence of unobserved heterogeneity and autocorrelation in the error term structure

the aftermath of financial crises a look on human and social wellbeing summary alongside its detrimental macroeconomics impacts financial crises can have substantial negative consequences on human and social wellbeing employing a cross country dataset on more than 100 banking and or currency crises during 1981 2007 this work examines the effects of financial crises on indicators of human and social wellbeing through employing an event study analysis the findings of this analysis suggest that the aftermaths of financial crises are characterized by increases in the growth rates of suicide rates crime rates and income inequality rates relative to their pre crisis trajectories additionally declines in the growth rates of health and educational expenditures government welfare expenditures and food quality and quantity intakes are common during periods immediately following financial crises such deteriorations are observed across different countries with income levels and also for crises that are and are not accompanied by recessions on average though human and social indicators are hit harder during financial crisis events accompanied by recessions this is especially true for crises in low and middle income economies in comparison to those in high income countries as a result not only are financial crises directly responsible for more rapid increases in income inequality within countries they may also be responsible for increasing inequalities of income security health nutrition and educational outcomes between richer and poorer countries needless to say deteriorations in many of these fronts are often associated with persistent or permanent losses in human and social wellbeing and cannot be assumed to be simply and immediately reversed with an economic recovery therefore the paper calls on the need for more concerted effort on the part of the policymakers to actively protect human and social outcomes during financial crises rather than trying to address such losses in the aftermath of crises because some of these losses are simply not recoverable

do workers remittances reduce the probability of current account reversals the authors combine the literature on financial crises in emerging markets and developing economies with that on international migrations by investigating whether the increasingly large flows of workers remittances can help reduce the probability of current account reversals the rationale for this stands in the great stability and low cyclicality of remittances as compared with other private capital flows these properties combined with the fact that remittances are cheap inflows of foreign currencies might reduce the probability that foreign investors suddenly flee out of emerging markets and developing economies and trigger a dramatic current account adjustment the authors find that remittances can have such a beneficial effect in particular they show that a high level of remittances as a ratio of gdp makes the relationship between a decreasing stock of international reserves over gdp and a higher probability of current account crises less stringent the same occurs though less neatly for the positive relationship between an increasing stock of external debt over gdp and the probability of current account reversals the results point also to a threshold effect of remittances the mechanisms just described are in fact much stronger when remittances are above 3 percent of gdp

the significance of quality differences for the united states and canada wheat trade some insights are provided as to why the united states the fifth largest wheat producer in the world imports a significant amount of wheat from canada after reviewing intra industry trade theory and the relevant empirical constructs an implicit price function of the import demand for wheat focusing on the physical and intrinsic characteristics of wheat is estimated the results are revealing there is a premium for the protein content and the percentage of heat damaged kernels in wheat clearly the fact that wheat is a differentiated commodity possessing a mix of physical and intrinsic characteristics together with price considerations helps to explain why the import of canadian wheat by the united states exists and why this became a significant issue in 1993

capital structure and sustainability an empirical study of microfinance institutions abstract the capital structure of lending institutions has become an increasingly prominent issue in the world of finance contemporaneously microfinance institutions mfis have risen to the forefront as invaluable lending institutions in the development process since capital constraints have hindered the expansion of microfinance programs and microfinance organizations have had various degrees of sustainability the question of how best to finance these organizations is a key issue this paper explores how changes in capital structure could improve mfi efficiency and financial sustainability i find causal evidence supporting the assertion that increased use of grants by large mfis decreases operational self sufficiency

innovation regimes r d and radical innovations in telecommunications abstract by introducing the concept of innovation regimes the aim of this article is to show how the rapid pace of technological development in the telecom sector may be explained by the close links between the sector s own r d and the creation of numerous innovations many of which are radical in contemporary innovation theory a theoretical antinomy exists whereas the creation of incremental innovations is variously explained in terms of rational responses to markets dynamics of technological regimes dominant design etc radical innovations in contrast are explained in terms of serendipity chance or haphazard scientific discoveries evidence from analysis of innovations in the telecom sector suggests that innovation regimes have provided a capability of coordination direction and leadership in the creation of many of the radical technological innovations that have emerged in the sector thus one may claim that the strong innovation regimes and high r d intensity of the telecom sector at least until recently have provided a capability of creating innovations on purpose for a purpose the policy implications of this contradict some of the assumptions on which the prevailing market oriented r d governance models and policies are based and which are supported by contemporary innovation theories

can leading indicators assess country vulnerability evidence from the 2008 09 global financial crisis abstract we investigate whether leading indicators can help explain the cross country incidence of the 2008 09 financial crisis rather than looking for indicators with specific relevance to the recent crisis the selection of variables is driven by an extensive review of more than eighty papers from the previous literature on early warning indicators our motivation is to address suspicions that indicators found to be useful predictors in one round of crises are typically not useful to predict the next round the review suggests that central bank reserves and past movements in the real exchange rate were the two leading indicators that had proven the most useful in explaining crisis incidence across different countries and episodes in the past for the 2008 09 crisis we use six different variables to measure crisis incidence drops in gdp and industrial production currency depreciation stock market performance reserve losses and participation in an imf program we find that the level of reserves in 2007 appears as a consistent and statistically significant leading indicator of who got hit by the 2008 09 crisis in line with the conclusions of the pre 2008 literature in addition to reserves recent real appreciation is a statistically significant predictor of devaluation and of a measure of exchange market pressure during the current crisis we define the period of the global financial shock as running from late 2008 to early 2009 which probably explains why we find stronger results than earlier papers such as obstfeld et al 2009 2010 and rose and spiegel 2009a b 2010 2011 which use annual data

a new approach to modeling early warning systems for currency crises can a machine learning fuzzy expert system predict the currency crises effectively abstract this paper presents a hybrid causal model for predicting the occurrence of currency crises by using the neuro fuzzy modeling approach the model integrates the learning ability of the neural network with the inference mechanism of fuzzy logic the empirical results show that the proposed neuro fuzzy model leads to a better prediction of crisis significantly the model can also construct a reliable causal relationship among the variables through the obtained knowledge base compared to neural network and the traditionally used techniques such as logit the proposed model can thus lead to a somewhat more prescriptive modeling approach based on determinate causal mechanisms towards finding ways to prevent currency crises

market power in a gis based hedonic price model of local farmland markets buyers of farmland are usually interested in parcels for sale that are close to their own farms with a limited number of parcels for sale this may lead to market power in local farmland markets the objective of this paper is to investigate whether market power affects farmland prices hedonic price models are adapted to allow for local market power of either sellers or buyers a distinction is made between rural and urban farmland markets the results provide evidence of market power effects in rural farmland markets however for farmland in urban areas market prices are dominated by speculation effects

financial contagion and international portfolio flows financial contagion is an issue of interest to policymakers and portfolio managers in the presence of contagion the benefits of geographical diversification may be overstated contagion is defined independently of changes in macroeconomic fundamentals it corresponds to a situation in which shocks in one country spread to another country in a significantly more pronounced manner than during quiet times in the study reported here i attempted to measure contagion from daily cross border portfolio flows using data from state street bank and trust company i constructed three indexes for 1996 through 2000 i found little statistical evidence of contagion but the weighted index that measured the contagiousness of flows reached its four year low in august 1998 suggesting that the russian crisis was characterized by both contagion and large aggregate outflows i also found that contagion appears to be regional and that the developed countries seem to be sheltered from contagion

does being an imf executive board member re pay an examination of imf loans and repayments this paper analyses the political economy of imf loans and repayments using data from 99 countries over the period 1984 2014 we bring two contributions to the literature analysing i the impact of the presence of a country on the imf executive board and ii repayment behaviour and not only loan requests we show evidence that loans from and repayments to the imf are influenced by the presence of countries on the imf executive board in particular the results indicate that a position on the board increases the loan amount by approximately 0 5 points and the repayment amount by approximately 0 2 points

sudden stops are global and local investors alike the main goal of this paper is to characterize the determinants of sudden stops caused by domestic vis a vis foreign residents are the decisions of domestic investors to invest abroad or of foreign investors to cut off funds from the domestic economy governed by the same set of determinants given the distribution of different types of sudden stop episodes over time and its different macroeconomic consequences the authors argue that the determinants may not be alike using an effective sample of 82 countries with annual information over the period 1970 2007 the analysis finds that global investors are less likely to stop bringing their capital when their economy is growing and the world interest rate is lower domestic agents are more willing to invest abroad if the macroeconomic performance of the domestic economy is poor high inflation the financial system is weak and there are high external savings current account surpluses increasing financial openness makes the domestic country more vulnerable to sudden stops caused by either local or global investors finally countries with higher shares of foreign direct investment are less prone to inflow driven sudden stops whereas the opposite holds for outflow driven sudden stops

crisis in the eye of the beholder economic crisis and partisan politics in latin american and east european international monetary fund programs this article analyzes the interaction between economic crises and partisan politics during international monetary fund program initiation in latin america in the 1980s and eastern europe in the 1990s the author argues that economic crises are at least in part in the eye of the beholder and therefore policy responses reflect the interaction between crisis intensity and the government s partisan interpretation of the crisis which in turn depends on the nature of the economic crisis and its broader regional and international environment using cross country statistical evidence from the two regions the article shows that certain types of crises such as liquidity shortfalls elicit similar responses across the ideological spectrum and regional contexts by contrast debt repayment and domestic crises are more prone to divergent ideological interpretations but the extent of partisan divergence is context sensitive in that it occurred during the latin american debt crisis but not in the post communist tra

false prophet or genuine savior assessing the effects of economic openness on sustainable development 1980 99 while many herald globalization the increasing interconnectedness of national economies to be associated with rising standards of living across the globe others fear its effects on sustainability antiglobalization forces and environ mentalists view these developments as a threat to the welfare of future generations because of profligate and excessive current consumption this study is the first to estimate the effects of dependence on trade foreign direct investment fdi and an index of economic freedom on the world bank s measure of sustainability the gen uine savings rate which measures the rate at which investment in the total stock of manufactured human and natural capital exceeds its depreciation contrary to pessi mists fears our indicators of economic openness show positive effects on sustain ability results that are robust to sample size testing procedure and several alternative specifications the results support those who suggest that distorted economies tend to be both inefficient and damaging to future generations if increasing trade fdi and economic freedom are hallmarks of globalization then worries about its effects on future well being are misplaced

measuring the social value of local public goods an empirical analysis within paris metropolitan area a non linear hedonic model is used to estimate the implicit marginal prices of 17 local public goods in a paris suburban area on an original data set of some 8200 housing units the results reveal a robust effect of local public school quality measured both by the fraction of junior high school students that are at least two years behind grade level and the student teacher ratio on house prices it is observed that housing owners marginal willingness to pay for reducing commuting time is roughly similar for public transportation than for car transportation another noticeable result is the complete capitalization of local taxes at a discount rate of 3 5 an illustration of the potential usefulness of the results for cost benefit analysis is also provided

demand for housing attributes in developing countries a study of pakistan the paper has applied a conventional framework of analysis of implicit markets to determine the characteristics of demand for housing attributes of quantity and quality in the urban areas of a larg

institutional quality and economic crises legal origin theory versus colonial strategy theory abstract in a natural experiment among former colonies between 1970 and 1999 weak institutions reflected in high settler mortality and french legal origin often increase the likelihood and intensity of local currency and real crises i e those resulting in a drop in real output amid six global crises the effects of institutions on crises are often mediated through macroeconomic policies but they are often not primary channels persistent institutions i e those reflected in the legal origins and settler mortality predict the occurrence and intensity of crises better than time varying institutions do

what to show on the wine labels a hedonic analysis of price drivers of sicilian wines unlike previous literature we construct a hedonic model of wine price that incorporates all the main categories of variables simultaneously to enable a better evaluation of their importance on wine price formation a comprehensive model has the advantage of providing more reliable estimates of the attributes implicit prices thereby facilitating firms pricing and improving effectiveness of wine production and marketing decisions we utilize two different datasets of sicilian wines collecting data from influential wine guides our results suggest that wine price strongly depends on objective features such as vintage alcoholic content geographical origin grape variety producer size and cellaring potential in addition use of containers like tonneaux and barrique positively affects prices whereas use of concrete containers has a negative influence no univocal indications emerge with regard to the effect of the type of company type of viticulture and firm age as for sensorial characteristics our a

the role of foreign currency debt in financial crises 1880 1913 versus 1972 1997 abstract we show that exposure to foreign currency debt does not necessarily increase the risk of having a financial crisis some countries do not suffer from financial fragility despite original sin before 1913 british offshoots and scandinavia afflicted with it avoided financial meltdowns today many advanced countries have original sin but few have had crises in both periods aggregate balance sheet mismatches are associated with a greater likelihood of a crisis the evidence suggests that foreign currency debt is dangerous when mis managed this is part of the difference between developed countries and emerging markets both of which borrow in foreign currency

measuring the impact of crime on house prices this paper uses data on over 2800 house sales in jacksonville fl to estimate the impact of crime on house prices a gis programme is used to develop neighbourhood characteristics that are unique t

sovereign debt defaults insights from history history provides many insights to address the issue of sovereign debt defaults this article first presents a detailed account of defaults in historical perspective it then discusses the solutions devised in the past to address sovereign debt crises and puts these into perspective with today s answers when crises occur finally the paper stresses the role of history when the events studied do not occur frequently and when archival data may shed new light on the process of the resolution of crises the impact of odious debts declarations of state succession and of international relations on sovereign defaults and on their settlement is thus also addressed copyright 2013 oxford university press

sovereign defaults by currency denomination abstract this paper explores the drivers of sovereign default in 100 countries over the period 1996 2012 we build a new data set of sovereign defaults and find that default events for local and foreign currency bonds are equally likely however governments default under different economic and financial conditions depending on the currency in which bonds are issued the explained variation in default probability rises from 43 to 62 when we account for differences in currency denomination we also provide evidence that global factors and market sentiment which are known to drive sovereign spreads do not help explain the probability of sovereign default hence these factors appear to affect the price of sovereign credit risk although not the risk itself

the market valuation of the fgis grain quality characteristics the issue addressed in this paper is whether the grain quality factors used by the federal grain inspection service in determining the quality grades of wheat exported by the united states including test weight dockage moisture content percentage of foreign material percentage of shrunken and broken kernels and protein content are characteristics that influence the price of wheat for export using shiplot data on the transactions price for hard red winter wheat hard red spring wheat and soft white wheat and the associated quality characteristics covering the period january 1990 to october 1991 and exported to 63 countires the results suggest that only the test weight and the protein content are characteristics consistently valued by the market

hedonic regressions mis specification and neural networks there is an emerging literature in the field of hedonic regressions which successfully applies flexible functional forms in contrast numerous authors report hedonic regressions with relatively simple functions often with little or no attempt to consider interaction terms and higher level powers such simple functions perform relatively well in spite of good a priori grounds for quite complex interaction effects indeed the studies are characterised by a general indifference to testing these more flexible models even when degrees of freedom permit using detailed scanner data hedonic functions for the uk tv market are estimated and tested for interaction effects for a case study of the market higher level interaction effects are tested for and compare the results with those from a neural network with its property of universal approximation the use of neural networks is particularly novel in this context and some general findings on their suitability emerge

impact of financial crises on poverty in developing world an empirical approach in this paper we adopt a cross country perspective to analyze the short term effects of currency banking and debt crises on poverty we employ multivariate fixed effects panel data analysis in order to examine whether and to what extent different types of financial crises impact the poverty headcount ratio and the poverty gap as measured by the world bank our findings suggest that out of the three categories of financial crises we identify it is currency crises that most significantly exacerbate both the incidence and depth of poverty in the short run we find evidence that banking crises are associated with an increase in the depth of poverty but not the incidence however this effect tends to be short lived while our analysis shows no direct effect of sovereign debt crises on short term poverty

a search model of housing market transactions arrive in a temporal sequence if an offer is received a seller must decide whether to accept the current offer or to reject that offer and continue to search it is this strategic choice and the possibility of not receiving an offer that results in extended selling periods and stocks of unsold houses rejection of offers and extended selling periods are to be expected in an uncertain environment where search may be used productively to obtain a higher selling price this paper considers the implications of a search environment for measurement of hedonic prices because an offer is observed only when it is acceptable to the seller sold houses constitute a self selected subsample in a search environment accurate measurement of hedonic prices in this situation may be obtained with the two stage procedure of heckman 3 and lee 5 or the maximum likelihood procedure summarized in amemiya 1 the empirical model presented in section ii is a generalization of the usual hedonic model in the sense that the pricing equation is supplemented with an exchange equation which determines probability of sale the coefficients in each equation provide useful information regarding housing search the coefficients in the pricing equation are marginal attribute prices while the attribute coefficients in the exchange equation are the standardized differences between the marginal attribute prices of buyers and sellers an interesting implication of this model is that attribute variation will not be systematically related to probability of sale if the marginal attribute prices of buyers and sellers equalize thus this model may be used to address two related questions regarding hedonic analysis in a search environment first does competition among buyers and sellers equalize marginal attribute prices in a search environment and second is accurate measurement of hedonic prices affected by the probabilistic nature of sale

does short term debt increase vulnerability to crisis evidence from the east asian financial crisis abstract does short term debt increase vulnerability to financial crisis or does short term debt reflect rather than cause the incipient crisis we study the role that short term debt played in the collapse of the east asian financial sector in 1997 1998 we alleviate concerns about the endogeneity of short term debt by using long term debt obligations that matured during the crisis we find that debt obligations issued at least three years before the crisis had a negative albeit sometimes insignificant effect on the probability of failure our results are consistent with the view that short term debt reflects rather than causes distress in financial institutions

withstanding financial crises would trade partners help or hurt abstarctthis article provides new empirical evidence on the losses of real activity caused by various financial shocks spillover effects due to foreign trade linkages deserve special attention to this end we estimate a modify auto regressive process and a seemingly unrelated regression equations estimator is used to account for the dependency of one s country growth on its trade weighted partners growth we run estimations on a set of currency collapses banking crises and sovereign defaults in 49 advanced and developing countries from 1978 to 2011 the trade weighted foreign demand effect mitigated the economic downturn following a banking or a sovereign debt crisis in all countries while only the advanced ones benefited from it after a currency collapse trade based spillover effects make banking crises more costly in the developing countries in those that liberalize their financial account it contrasts with what is observed during currency or sovereign debt crises

currency crises and institutions abstract this study furthers recent literature on currency crises and institutions the main objective is to re evaluate the causes of currency crises by focusing on the role played by a broader array of institutional factors and crisis episodes than have previously been considered while at the same time controlling for economic factors our dataset consists of over 30 countries covering 13 institutional factors for the period 1984 2002 two questions are addressed they are 1 what mix of institutions may contribute to or set the stage for a currency crisis and 2 what mix of institutions may affect the depth of currency crises as measured by a decline in output our findings reveal that institutional as well as economic factors affect the probability of currency crises and that worse institutions are associated with bigger contractions in output during the crisis in general our strongest results regarding institutions show that corruption a de facto fixed exchange rate regime weak government stability and weak law and order increase the probability of a currency crisis we find mixed evidence that deposit insurance the removal of capital controls a lack of central bank independence financial liberalization and civil law increase the chance of crisis we find a similar set of factors worsens the contraction in output during a crisis except for deposit insurance which we find moderates the contraction in output

how central banks prepare for financial crises an empirical analysis of the effects of crises and globalisation on international reserves central banks international reserve holdings have increased significantly in the recent past while traditional models fail to explain this accumulation of reserves the more recent literature argues that reserves are used as a lifejacket against currency crises however research so far has neglected the question whether and how central banks change their precautionary reserve holdings after the country was affected by a currency crisis this paper tests the hypothesis that central banks revise their reserve policy in the aftermath of currency crises a dynamic panel data model is estimated for developing and industrial countries covering the period from 1975 to 2003 the evidence suggests that currency crises induce a permanent increase of reserves this effect is particularly strong for recent currency crises since the asian financial crisis

who recovers first banking crises resolution in developing countries this article evaluates conditions that facilitate banking crises resolution using data from 67 developing countries from 1980 to 1995 in particular the author examines explanatory variables under three categories external macroeconomic constraints the role of the international monetary fund imf and domestic political conditions the principal results of the analyses are twofold first imf credits decrease the probability of resolving banking crises this result holds controlling for potentially confounding variables and in a test for endogeneity second the decisiveness of a political regime significantly influences the probability of emerging from systemic distress specifically in cases of moderate banking distress decisiveness facilitates resolution of crisis but during periods of severe crises less decisive governments i e governments constrained by accountability groups are likely to recover more quickly than are those with less constrained executives

hedonics and demand analysis the implicit demand for player attributes i introduction hedonic analysis is the standard technique of applied econometrics for modeling differentiated products a hedonic price function relates the observed price of a differentiated good to the bundle of characteristics of which the good is composed the derivatives of the function with respect to the characteristics are the implied hedonic prices which empirical work typically seeks to estimate as has been recognized since at least the work of rosen 1974 underlying the hedonic price function is an implicit market for these characteristics a number of studies have attempted to estimate the associated supply demand system in particular applied contexts based on data on the quantities of the characteristics used in the estimation of the hedonic price function and the resulting estimated hedonic prices examples include nelson 1978 witte sumka and erekson 1979 and thomas 1993 rather than a complete supply demand system other authors focus only on the implicit demand for characteristics for example polinsky and rubinfeld 1977 harrison and rubinfeld 1978 agarwal and ratchford 1980 bender gronberg and hwang 1980 blomquist and worley 1981 quigley 1982 mendelsohn 1984 and palmquist 1984 a curious aspect of these studies which appears to have gone unrecognized is the failure to draw on modern econometric demand analysis in the estimation of the implied demand system for the characteristics instead the analysis of the implicit market proceeds on the basis of ad hoc typically linear or loglinear functional forms which involve no explicit derivation from consumer theory and which impose arbitrary and non testable restrictions on preferences as a consequence there is little means beyond descriptive econometric measures goodness of fit examination of signs and t ratios and so on for judging the adequacy or legitimacy of the results no use is made of contemporary flexible functional form methodology which provides a second order approximation to arbitrary preferences and which permits in addition to the calculation of elasticities the testing of fundamental hypotheses of consumer theory such as demand homogeneity and symmetry of the slutsky matrix and numerical checks on the concavity of the associated implied expenditure function the present work attempts to fill this gap however instead of a differentiated good in a product market to which consumer demand theory would apply we choose to study a good in a factor market so that the relevant demand equations are a system of factor demands for the underlying characteristics the good in question is the service of baseball players to major league baseball teams which is a differentiated good in that different players represent different bundles of alternative attributes such as pitching or hitting skills our focus is solely on the implicit demand system for these attributes no attempt is made to estimate the associated supply system reflecting player behavior there are several reasons for this seemingly peculiar choice of commodity first the factor market for baseball players is of some intrinsic interest as evidenced by the extent to which it has been studied by economists for a taste of this see the entry by quirk 1987 in the new palgrave and the recent survey by fort and quirk 1995 in particular the market has been the focus of work by labor economists examples are blass 1992 khan 1993a 1993b and sommers 1992 much of this literature derives from the seminal work of scully 1974 who estimated equations for baseball player salaries as functions of player skills although not previously recognized in these terms underlying scully s salary equations are implicit markets for player skills the previous work involving baseball salary equations by scully 1974 1989 and others for example blass 1992 hill and spellman 1984 fort 1992 pascal and rapping 1972 raimondo 1983 and sommers 1990 is useful because it provides guidance as to the appropriate specification of the hedonic price equation

tortoises and hares choice among technologies of unknown merit recent work in the area of competing technologies and increasing returns has largely been concerned with the effectiveness of the market in delivering optimal outcomes the existence of inefficient market outcomes suggests that there might be a place for intervention in the technology choice process this paper develops a model of sequential choice in which the choice process is subject to centralized control the model is used to show that intervention can increase the expected present value of the technology adoption process it remains however that one technology and not necessarily the best will come to dominate the market copyright 1991 by royal economic society

foreign currency debt financial crises and economic growth a long run view what are the costs of hard currency liabilities after being implicated in the global financial instability of the late 1990s the costs are widely believed to be large and as a result many emerging markets have pushed to minimize currency mismatches we study the growth effects of exposure to foreign currency debt using data from two periods of international financial integration 1880 1913 and 1973 2002 for over 45 countries hard currency debt is associated with increased risks of currency and debt crises in both periods especially when a country s macroeconomic financial fundamentals are weak we find the risk of financial crisis associated with hard currency debts translated into significantly diminished growth rates however we also find evidence that strong financial development and policy credibility attenuate the crisis risks associated with high exposure to hard currency debt which has implications for eastern european countries where large current account deficits and high levels of hard currency debt are believed to pose financial risks in this region some countries have adopted flexible exchange rates and avoided foreign currency debt several others have built up large net foreign currency liabilities and are exposed to a significant likelihood of a financial crisis in the near future

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

currency devaluation and stock market response an empirical analysis abstract we study local stock market reaction to currency devaluation by a country s central bank devaluations appear to be anticipated by the local stock markets and there are significant negative abnormal returns even one year prior to the announcement of the devaluation a negative trend in stock returns persists for up to one quarter following the first announcement and then becomes positive thereafter suggesting a reversal we explore whether changes in macroeconomic variables prior to currency devaluations are related to abnormal stock returns we find that stock returns are significantly lower if the devaluation is larger and if the country is a developing nation furthermore stock markets decline more around devaluations if reserves are lower if the real exchange rate has depreciated over the prior years if the capital account has declined if the current account deficit has gone up or if the country credit rating has deteriorated

on the choice of functional form for hedonic price functions the empirical results presented in this paper demonstrate the usefulness of quadriatic models in the estimation of hedonic price functions we propose a quadriatic semi log model a restricted case of the quadriatic box cox model whose standardized marginal attribute prices are linear functions of the attribute vector this specification outperforms the linear box cox specification in terms of explanatory power and captures much of the increase in explanatory power provided by the quadriatic box cox model without the corresponding loss in the ability to interpret the coefficient estimates for policy applications the quadriatic semi log model provides a useful alternative to linear specification

forecasting the fragility of the banking and insurance sectors linkages between banks and insurance companies are important when forecasting the fragility of the banking and insurance sectors we propose a novel empirical framework that allows us to estimate unobserved linkages in panel data sets that contain observed regressors we find that taking unobserved common factors into account reduces the root mean square forecasts error of firm specific forecasts by up to 9 of system forecasts by up to 14 and by up to 39 for systemic forecasts of more distressed firms relative to a model based on observed variables only estimates of the factor loadings suggest that the correlation of financial institutions has been relatively stable over the forecast period

currency crises capital account liberalization and selection bias are countries with unregulated capital flows more vulnerable to currency crises efforts to answer this question properly must control for self selection bias since countries with liberalized capital accounts may also have more sound economic policies and institutions that make them less likely to experience crises we employ a matching and propensity score methodology to address this issue in a panel analysis of developing countries our results suggest that after controlling for sample selection bias countries with liberalized capital accounts experience a lower likelihood of currency crises that is when two countries have the same likelihood of allowing free movement of capital based on historical evidence and a very similar set of economic and political characteristics and one country imposes controls and the other does not the country without controls has a lower likelihood of experiencing a currency crisis this result is at odds with the conventional wisdom and suggests that the benefits of capital market liberalization for external stability are substantial

contagion effects of sovereign credit rating revisions on the real economy is it trade or finance we analyse the contagion effects of sovereign credit rating revisions on the real economy with particular emphasis on the intensity of trade and finance channels our findings show that event coun

when do governments improve fiscal institutions lessons from financial crisis and fiscal reform in latin america do crises really lead to more institutional reforms this paper explores the connection between financial crises and one type of reform frequently advocated during the recent global financial crisis namely fiscal institutional reforms some authors expect that crises lead to reforms but we demonstrate that the relationship is not so straightforward using a data set of latin american countries that experienced several crises and also several periods of reform in the period from 1990 to 2005 we find that the type of crisis and its duration matter we argue that reforms are less likely during a banking crisis whereas fiscal crises are most likely to lead to fiscal reforms this means that the type of economic crisis is important for explaining the likelihood of reforms we explore other possible explanations for reform such as the partisanship of the president and whether a country is under an imf program and do not find confirming evidence for alternative explanations

temporary controls on capital inflows abstract during the past decade a number of countries imposed capital controls that had two distinguishing features they were asymmetric in that they were designed principally to discourage capital inflows and they were temporary this paper studies formally the consequences of these policies calibrates their potential effectiveness and assesses their welfare implications in an environment in which the level of capital inflows can be sub optimal in addition motivated by the fact that these types of controls have often been left in place after the dissipation of the shock that lead to the controls being implemented the paper evaluates the welfare cost of procrastination in removing these types of controls

taste or reputation what drives market prices in the wine industry estimation of a hedonic model for italian premium wines the aim of this article is to provide new evidence on the factors affecting wine prices on both methodological and factual grounds on the methodological ground this study is the first to apply a general box cox transformation within the context of hedonic models which exploit all the variables objective and sensorial characteristics reputation pointed out by previous literature as relevant in driving market prices on the factual ground the article fills the lack of empirical evidence on the issue for italy one of the leading wine producers by using a large data set on two premium quality wines barolo and barbaresco covering the 1995 1998 vintages our results support the evidence obtained using data from other countries showing that sensorial traits the reputation of wines and producers as well as objective variables are all important factors influencing the consumers willingness to pay more importantly by resorting to a nonnested statistical test vuong 1989 we compare two alternative

together or apart the relationship between currency and banking crises abstract the purpose of this study is to provide empirical evidence on the links between currency and banking crises panel data probit and bivariate probit models are estimated to a sample of 21 developed and developing countries having monthly observations between the years 1985 and 2010 the findings indicate that banking crises precede currency crises and vice versa currency crises also indirectly influence future banking crises probability through external shocks liberalized financial markets or highly leveraged banking sectors the study also finds evidence of contemporaneous correlation between the two crises the results not only confirm the theoretical links between banking and currency crises but also underline the importance of higher frequency data in analyzing the relationship between various financial crises

currency crises are they all the same abstract the plethora of currency crises around the world has fueled many theories on the causes of speculative attacks the first generation models focus on fiscal problems while the second generation models emphasize countercyclical policies and self fulfilling crises in the 1990s models pinpoint to financial excesses with the crisis of argentina in 2001 models of sovereign default have become popular again while the theoretical literature has emphasized variety the empirical literature has supported the one size fits all models this paper contributes to the empirical literature by assessing whether the crises of the last 30 years are of different varieties

fiscal policy and the duration of financial crises financial systems across the world have all come under pressure due to the on going financial crisis one of the most often asked questions during a collapse is how long and how deep will the decline be as well as what policy initiatives can be employed to shorten the recession this study estimates a model of the duration of financial crises in an attempt to identify whether fiscal policy can reduce the time to recovery the results suggest that fiscal shocks which could provoke an overreaction on the part of markets tend to lengthen crisis duration significant nonlinear effects of government spending are also reported in relation to trade openness and financial openness

have business cycles changed over the last two decades an empirical investigation abstract we document the properties of business cycles of 71 countries 23 industrial countries and 48 emerging market economies or emes from 1970q1 to 2012q4 using the harding and pagan dating algorithm first recessions are deeper steeper and costlier among emes especially in east asia and latin america second recoveries are swifter and stronger among emes partly due to stronger rebound effects third recessions became less costly during the globalization period 1985 2007 for industrial countries and emes thus reflecting institutional changes made during the great moderation fourth the dynamic behavior of macroeconomic indicators around peaks in real gdp is more volatile in downturns associated with crisis compared to other downturns fifth peaks in financial cycles credit and asset prices tend to precede peaks in real output cycles finally although both industrial and emerging markets have experienced deep recessions during the recent global financial crisis the emerging markets have recovered faster

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

a new world order explaining the international diffusion of the gold standard 1870 1913 abstract the gold standard gradually became an international monetary regime after 1870 similarly some nations in the european union are waiting to adopt the euro while others have joined immediately what explains the timing of exchange rate regime adoption to find out the international diffusion of the gold standard is analyzed duration analysis shows that network externalities operating through trade channels the desire to decrease borrowing costs on international capital markets and the level of development matter some evidence shows that the level of exchange rate volatility or inflationist agricultural interests did not matter for the timing of adoption

predicting financial crises the statistical significance of the signals approach abstract the signals approach as an early warning system has been fairly successful in detecting crises but it has so far failed to gain popularity in the scientific community because it cannot distinguish between randomly achieved in sample fit and true predictive power to overcome this obstacle we test the null hypothesis of no correlation between indicators and crisis probability in three applications of the signals approach to different crisis types to that end we propose bootstraps specifically tailored to the characteristics of the respective datasets we find 1 that previous applications of the signals approach yield economically meaningful results 2 that composite indicators aggregating information contained in individual indicators add value to the signals approach and 3 that indicators which are found to be significant in sample usually perform similarly well out of sample

towards a new early warning system of financial crises abstract this paper develops a new early warning system ews model based on a multinomial logit model for predicting financial crises it is shown that commonly used ews approaches which use binomial discrete dependent variable models are subject to what we call a post crisis bias this bias arises when no distinction is made between tranquil periods when economic fundamentals are largely sound and sustainable and crisis post crisis periods when economic variables go through an adjustment process before reaching a more sustainable level or growth path we show that applying a multinomial logit model which allows distinguishing between more than two states is a valid way of solving this problem and constitutes a substantial improvement in the ability to forecast financial crises the empirical results reveal that for a set of 20 open emerging markets for the period 1993 2001 the model would have correctly predicted a large majority of crises in emerging markets

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

exchange market mayhem the antecedents and aftermath of speculative attacks exchange market mayhem the antecedents and aftermath of speculative attacks this paper evaluates the causes and consequences of episodes of turbulence in foreign exchange markets using data from 1959 through 1993 for twenty oecd countries we consider the antecedents and aftermath of devaluations and revaluations flotations fixings and speculative attacks which may not be successful we find that realignments of fixed exchange rates are alike devaluations are preceded by political instability budget and current account deficits and fast growth of money and prices revaluations are mirror images of devaluations speculative attacks resemble devaluations but money growth and inflation are more endemic and there is no last minute attempt to tighten monetary policy in contrast few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables transitions between exchange rate regimes are largely idiosyncratic and are neither consistently provoked ex ante by systematic imbalances nor typically justified ex post by subsequent changes in policy we conclude that there are no clear early warning signals of many speculative attacks and no easy solutions for policy makers barry eichengreen andrew k rose and charles wyplosz

the impact of financial crises and tolerance for uncertainty abstract financial crises can have severe negative effects on investment one reason for this is that financial crises increase uncertainty increasing the real option value of delaying investment in this paper we show that the negative effect of crises on investment differs significantly across countries in countries with low tolerance for uncertainty the negative effect is strong the negative effect is absent in countries that are more tolerant of uncertainty these findings are similar across different types of financial crisis they vary as predicted across type of investor asset and industry and they are not driven by uncertainty averse countries adopting more rigid institutions

the choice of functional forms for hedonic price equations comment abstract rosen 13 freeman 4 halvorsen and pollakowski 6 and others have stressed that economic theory does not suggest an appropriate functional form for hedonic price functions 1 it consequently is reasonable to try several functional forms and utilize the multiple regression equation with the best performance in this spirit halvorsen and pollakowski 6 recommend using the box cox flexible functional form for hedonic analysis and measuring best performance with a goodness of fit test the box cox methodology has also been adapted in hedonic studies by goodman 5 linneman 10 blomquist and worley 1 and eberts and gronberg 3 2 the box cox is particularly suited for testing functional forms because many familiar forms such as semilog log linear and translog are subsets of the flexible box cox permitting nested hypothesis testing in this note we illustrate that the formal hypothesis testing advantage of the box cox functional form is purchased at the expense of other important goals the goal of most hedonic studies is to estimate the prices of the characteristics to measure the response to changes in the prices and or to predict future expenditures using a best fit criterion to choose functional forms does not necessarily lead to more accurate estimates of characteristic prices in fact the large number of coefficients estimated with the box cox functional form reduces the accuracy of any single coefficient which could lead to poorer estimates of specific prices second because any negative number raised to a noninteger real power is imaginary the traditional box cox functional form is not suited to any data set containing negative numbers third the box cox functional form may be inappropriate for prediction since the mean predicted value of the untransformed dependent variable need not equal the mean of the sample upon which it is estimated the predicted untransformed variable housing value will be biased the predicted untransformed dependent variable may also be imaginary fourth the nonlinear transformation results in complex estimates of slopes and elasticities which are often too cumbersome to use properly we discuss each of these drawbacks and quantify them when possible in the remainder of this note

developing an early warning system to predict currency crises abstract the purpose of this paper is to develop an early warning system to predict currency crises in this study a data set covering the period of january 1992 december 2011 of turkish economy is used and an early warning system is developed with artificial neural networks ann decision trees and logistic regression models financial pressure index fpi is an aggregated value composed of the percentage changes in dollar exchange rate gross foreign exchange reserves of the central bank and overnight interest rate in this study fpi is the dependent variable and thirty two macroeconomic indicators are the independent variables three models which are tested in turkish crisis cases have given clear signals that predicted the 1994 and 2001 crises 12 months earlier considering all three prediction model results turkey s economy is not expected to have a currency crisis ceteris paribus until the end of 2012 this study presents uniqueness in that decision support model developed in this study uses basic macroeconomic indicators to predict crises up to a year before they actually happened with an accuracy rate of approximately 95 it also ranks the leading factors of currency crisis with regard to their importance in predicting the crisis

a cardan s discriminant approach to predicting currency crashes abstract this paper models large swings in exchange rates by introducing nonlinearity via the generalized normal gen distribution lye j n martin v l 1993 robust estimation nonnormalities and generalized exponential distributions journal of the american statistical association 88 261 267 as the distribution allows for bimodality a switch between modes may give rise to currency crashes a statistic known as cardan s discriminant based on the shape parameters of the gen is used to detect bimodality the cardan s discriminant is found to reliably predict currency crashes for eight emerging countries and generate relatively low false signals for stable currencies

statistical distributions and the identification of currency crises abstract we use extreme value theory to identify periods of currency crisis for a broad cross section of asian european and latin american countries we argue that our methodology improves upon the more conventional methodology for defining currency crises because fewer parametric assumptions need to be satisfied we compare the incidence of currency crises using the conventional method with the incidence obtained using our method we conclude that identifying currency crises using extreme value theory is a good alternative to the conventional method

did established early warning signals predict the 2008 crises abstract over the past 60 years a voluminous literature has painstakingly developed crises theories and their associated early warning signals the hallmark of this literature is the consistency with which selected early warning signals such as the level of reserves and exchange rate appreciations are presumed to predict different types of crises across countries and time the diversity of crises theories that motivate early warning signals presents however a challenge to empirical implementations given that the true model of early warning signals is unknown omitted variable bias contaminates estimates and confidence levels when the uncertainty surrounding a particular theory has been ignored after addressing model uncertainty in early warning signal regressions using an extended version of frankel and saravelos 2012 j int econ 87 216 231 dataset we do not find a single early warning signal that alerts to all dimensions of the 2008 crisis instead distinct sets of early warning signals identify different dimensions of the crisis banking balance of payments exchange rate pressure and recession

towards a credit network based early warning indicator for crises this paper presents an agent based model which underlines the importance of credit network and leverage dynamics in determining the resilience of the system defining an early warning indicator for crises the model reproduces macroeconomic dynamics emerging from the interactions of heterogeneous banks and firms in an endogenous credit network banks and firms are linked through multiple credit relations which derive from individual target leverage choices agents choose the more convenient leverage level according to a basic reinforcement learning algorithm simulations are calibrated on balance sheet data of banks and firms quoted in the japanese stock exchange markets from 1980 to 2012

dual technological trees assessing the intensity and strategic significance of technological change abstract the paper addresses the issue of the potential impact of technological innovation on competition it aims at reviewing abernathy and utterhack s dominant technology dosi s technological trajectories clark s design hierarchies abernathy and clark s transilience concepts we recognize that the intensity of innovation falls along a continuum and introduce the concept of micro radical innovation we choose to qualify the strategic significance of technological change through the transilience concept leading to the principle of competence relatedness we introduce dual technological trees dtt as a way to present a hierarchical map of the many technological options that may be searched to fulfil a certain generic function in the market place the complex and unpredictable nature of technology is recognized the paper essentially suggests to map the various technological options and suboptions that one would think plausible at the present time keeping in mind that technology will end up finding its own peculiar ways the dynamic interaction between the dtt and some customer concept tree on the market side is also discussed we finally turn to the use of the dtt to assess the potential strategic significance of innovation several examples are presented

an exorbitant privilege in the first age of international financial integration abstract whether the united kingdom enjoyed an exorbitant privilege over the period 1871 1914 is analysed with a new dataset the use of microdata on financial securities sheds light on some issues arising from us studies a monthly proxy for the british international investment position and estimates of returns are constructed pointing to an average benefit of 8 3 of gdp with high variation the finding supports the claim that exorbitant privilege is partly a general characteristic of the issuer of the global reserve currency nonetheless there are fundamental differences between the two countries britain grossed up small returns by a large positive position

fiscal sustainability the impact of real exchange rate shocks on debt valuation interest rates and gdp growth summary this paper discusses the way in which the existence of foreign currency debt affects debt sustainability analysis we show that a devaluation of the local currency can significantly change the path of a sustainable fiscal policy our model expands previous research as the adjustment comes not only through changes in the value of the foreign currency denominated debt but also through the effects of the devaluation on interest rates and economic growth we find that the fiscal adjustment required after a devaluation increases with the size of the devaluation the length of the adjustment period the effect on interest rates and growth and the share of public debt denominated in foreign currency

capital controls and exchange rate instability in developing economies abstract a large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability this paper investigates whether legal restrictions on international capital flows are associated with greater currency stability we employ a comprehensive panel data set of 69 developing economies over the 1975 1997 period identifying 160 currency crises we control for macroeconomic political and institutional characteristics that influence the probability of a currency crisis employ alternative measures of restrictions on international payments and account for possible joint causality between the likelihood of a currency attack and the imposition of capital controls we find evidence that restrictions on capital flows do not effectively insulate economies from currency problems rather countries with less restrictive capital controls and more liberalized regimes appear to be less prone to speculative attacks