macroeconomics of stagflation under flexible exchange rates the concerns of macroeconomic policy in the industrial countries in recent years have shifted the focus of open economy ncroeconomics to new and interesting problems although no synthesis or a fully coherent theory of policy has yet emerged from this research the results have already led to major revisions in views about the nature of the problems that policy has to deal with this paper provides a selective survey and discussion of son of the results of recent research with errhasis on their inplications for policy pentti j k kouri department of economics 269 mercer street second floor new york university new york n y 10003 macroeconomics of stagflation under flexible exchange rates

government debt capital accumulation and the terms of trade in a model of interdependent economies this paper extends diamond s overlapping generations model into a two good two country setting to analyze the impact of an increase in domestic government debt on the terms of trade the current account and capital accumulation at home and abroad it is found that while the direction of change in the terms of trade is indeterminate in the short run for stability it must agree with that in the steady state which in turn is dependent on the initial debt status in trade of the home country the higher level of government debt leads unambigously to lower levels of capital stocks however

a multiplier decomposition method to analyze poverty alleviation abstract the objective of this paper is to present a multiplier decomposition method focusing on poverty alleviation the decomposition captures the various mechanisms and linkages through which a production sector s output contributes to poverty alleviation within a socioeconomic system represented by a social accounting matrix sam it is shown that a multiplier can be broken down into two multiplicative effects the distributional and interdependency effects the decomposition method is applied to the case of indonesia a key policy implication is that the human capital of the poor needs to be enhanced if they are not to be sealed off from the industrialization process

nonfarm diversification poverty economic mobility and income inequality a case study in village india this paper assembles data at the all india level and for the village of palanpur uttar pradesh to document the growing importance and influence of the non farm sector in the rural economy between the early 1980s and late 2000s the suggestion from the combined national sample survey and palanpur data is of a slow process of non farm diversification whose distributional incidence on the margin is increasingly pro poor the village level analysis documents that the non farm sector is not only increasing incomes and reducing poverty but appears as well to be breaking down long standing barriers to mobility among the poorest segments of rural society efforts by the government of india to accelerate the process of diversification could thus yield significant returns in terms of declining poverty and increased income mobility the evidence from palanpur also shows however that at the village level a significant increase in income inequality has accompanied diversification away from the farm a growing literature argues that such a rise in inequality could affect the fabric of village society the way in which village institutions function and evolve and the scope for collective action at the village level failure to keep such inequalities in check could thus undermine the pro poor impacts from the process of structural transformation currently underway in rural india

farm productivity and rural poverty in india armed with new data we return to an old question from the pages of this journal to what extent do india s rural poor share in agricultural growth combining data from 24 household sample surveys spanning 35 years with other sources we estimate a model of the joint determination of consumption poverty measures agricultural wages and food prices we find that higher farm productivity brought both absolute and relative gains to poor rural households a large share of the gains was via wages and prices though these effects took time the benefits to the poor were not confined to those near the poverty line

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

an exploration in the theory of exchange rate regimes three exchange rate regimes a float a one sided peg and a cooperative peg are evaluated and compared in terms of efficiency and welfare levels the framework of analysis embodies country specific monies with the money of each country being used to transact in its commodity markets and its currency denominated bonds welfare levels depend only on consumption levels in the presence of perfect foresight all equilibrium allocations are pareto efficient in a floating exchange rate regime the perfect foresight equilibrium allocation coincides with an equilibrium of a costless barter economy the same result holds in a one sided peg if the pegging country s exchange rate stabilizing authority breaks even over time in a cooperative peg regime there is a different equilibrium allocation for each combination of exchange rate levels and monetary policies problems of policy coordination and conflicts in desired monetary policies are discussed

modeling agricultural growth multipliers agriculture s potential as an engine of third world growth depends in large part on the size of the production and consumption linkages it stimulates in rural regions current estimates of agricultural growth multipliers within rural regions vary widely not only because economic structures differ across regions but also because the array of fixed price models most commonly used embody widely differing basic assumptions among fixed price models the semi input output formulation projects the most plausible multipliers but even they overstate the magnitude of growth multipliers by 10 to 25 according to the price endogenous model developed here

china s uneven progress against poverty while the incidence of extreme poverty in china fell dramatically over 1980 2001 progress was uneven over time and across provinces rural areas accounted for the bulk of the gains to the poor though migration to urban areas helped the pattern of growth mattered rural economic growth was far more important to national poverty reduction than urban economic growth agriculture played a far more important role than the secondary or tertiary sources of gross domestic product gdp rising inequality within the rural sector greatly slowed poverty reduction provinces starting with relatively high inequality saw slower progress against poverty due both to lower growth and a lower growth elasticity of poverty reduction taxation of farmers and inflation hurt the poor external trade had little short term impact

intergenerational transfers as social insurance abstract in an overlapping generations model with stochastic population changes a social security scheme with a fixed level of payments to the retired can be interpreted as providing social insurance against the risks of demographic change

intergenerational risk sharing and risk taking of a pension fund abstract by using their financial reserves efficiently pension funds can smooth shocks on their asset returns and can thus facilitate intergenerational risk sharing in addition to the primary benefit of improved time diversification this form of risk allocation affords the additional benefit of allowing these funds to take better advantage of the equity premium which also favors the consumers in this paper our aim is twofold first we characterize the socially efficient policy rules of a collective pension plan in terms of portfolio management capital payments to retirees and dividend payments to shareholders we examine both the first best rules and the second best rules where in the latter case the fund is constrained by a solvency constraint and by a guaranteed minimum return to workers contributions second we measure the social surplus of the system compared to a situation in which each generation would save and invest in isolation for its own retirement we estimate that the certainty equivalent return of the pension saving scheme goes from 3 23 per year to 3 76 when intergenerational risk sharing is introduced one of the main results of the paper is that better intergenerational risk sharing does not reduce the risk born by each generation rather it increases the expected return to the workers contributions

aspects of the optimal management of exchange rates abstract this paper shows that the choice of the optimal exchange rate regime depends on the stochastic shocks affecting the economy the higher the variance of real shocks the larger the desirability of fixity of exchange rates the desirability of exchange rate flexibility increases the larger are the variances of the shocks to the demand for money to the supply of money to foreign prices and to purchasing power parities when the economy produces traded and non traded goods the desirability of exchange rate flexibility diminishes the higher is the relative share of non traded goods and the lower are the elasticities of demand and supply of the two goods

rational expectations endogenous currency substitution and exchange rate determination the paper employs the intergenerational model to derive the demands for domestic and foreign currencies from microeconomic optimizing behavior in the absence of government policy we obtain the kareken and wallace result that exchange rates are constant and indeterminate we discuss the reasons why nations may find it in their interests to impose probabilistic capital controls it is shown that the imposition of probabilistic capital controls yields a unique generally nonstationary exchange rate path and that this path is determined in accord with the monetary approach as the probability of controls tends to zero the exchange rate remains determinate

forward exchange rates in general equilibrium abstract this paper develops a two country overlapping generations model of an economy with a forward market in foreign exchange the equilibrium forward rate exhibits the conventional decomposition into the expected future spot rate a convexity term and a risk premium unlike partial equilibrium models however the model expresses these terms as functions of the primitive structural parameters of the economy it thus provides insights into the structure of the premium which may facilitate interpretation of empirical studies of the forward markets in particular it suggests that time varying risk premia may arise from changes in the distribution of wealth between countries over time

intergenerational risk sharing abstract in this paper we examine government debt and tax transfer policies that can be improve the allocation of risk between generations markets cannot allocate risk efficiently between two generations whenever the two generations are not both alive prior to the occurence of a stochastic event this implies that government policies transferring risk between generations have the potential to create first order welfare improvements our model provides a non keynesian justification for the debt finance of wars and recessions as well as an added rationale for social security type tax transfer schemes which aid unlucky generations e g the depression generation at the expense of luckier generations

income uncertainty bequests and annuities abstract life uncertainty and income uncertainty are modeled simultaneously in order to analyze the influence of perfecting income insurance in the size of bequests and the demand for annuities the main result shows that government intervention aimed at providing intergenerational risk sharing acts as a bequest substitute and if annuities are available reduces the demand for annuities

growth still is good for the poor incomes in the poorest two quintiles on average increase at the same rate as overall average incomes this is because in a global dataset spanning 118 countries over the past four decades changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income the variation in changes in quintile shares is also small relative to the variation in growth in average incomes implying that the latter accounts for most of the variation in income growth in the poorest quintiles these findings hold across most regions and time periods and when conditioning on a variety of country level factors that may matter for growth and inequality changes this evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles

the steady states of a stochastic decentralized growth model the purpose of this paper is to prove the existence of a steady state for a simple decentralized growth model which is subject to random shocks the model has the following elements the population is composed of an endless sequence of overlapping cohorts of two period households each cohort is the same size and there is an aggregate production function and one output good because the labor supply is fixed the production function relates output in each period t to the total saving of all young families in period t 1 and to the current realization zt of a random variable z the random variable has an exogenous unchanging and known distribution futures markets are imperfect young families can save at time t only by investing in physical capital which will pay a return at time t 1 the return depends on the size of the time t 1 capital stock k and on zl r let y y k 1 zt be the vector of incomes of young families at time t then such families use a function g vf k to predict k note that g is nonstochastic the families adjust their saving to maximize their expected utility where the latter is computed using g and the distribution function for 5 we call resulting aggregate savings by young families y y g we use a fixed point argument to prove the existence of sets k and y and an expectation function g such that if all realizations of 5 fall within z i y k x z c k ii g y k and iii g y y y g all y e y the resulting g determines in a very simple context what grandmont 7 would call rational expectations and what radner 17 181 would call an equilibrium of plans and expectations we use this g to generate a transition function v for k we then show v has a finite invariant set k which includes all feasible states except one trivial one there are a finite number of ergodic sets el en c k for v and there is a unique stationary distribution function di associated with each ei each pair di ei constitutes a steady state corresponding to green and majumdar s 9 concept of an equilibrium distribution and to grandmont s 71 long run equilibrium once the evolution of the economy carries it into ei some

seigniorage and the case for national money in countries with high rates of inflation there is typically movement away from the use of the local currency the paper analyzes the costs and benefits of using a local currency with emphasis on the seigniorage foregone by using a foreign money even if it should be desirable for a country to fix its exchange rate it still loses seigniorage if it does not use its own money the case for using a foreign money then turns largely on the superior discipline imposed on domestic policymakers by removing their control over the money supply alternative methods of imposing discipline are discussed estimates of the amount of seigniorage raised by different governments are presented seigniorage amounts in some cases to about 10 percent of government revenue estimates are also presented of both the annual flow and one time stock costs of giving up use of domestic currencies and instead using the dollar the flow cost is typically about 1 percent of gnp and the stock cost is around 10 percent of gnp

time consistency and the feasibility of alternative exchange rate regimes abstract in a stochastic cash in advance model of an open economy a fixed exchange rate regime is dynamically inconsistent and hence economically infeasible in a cournot nash equilibrium if there are no exogenous constraints imposed on government behaviour and nominal interest rates are strictly positive on the other hand a perfectly floating exchange rate regime is feasible but it cannot sustain any international asset trade however a noncooperative equilibrium with nonzero asset trade and a fixed exchange rate regime may become feasible when we allow policymakers to employ trigger retaliation strategies

public policies to support the development of renewable energy in romania a review abstract the aim of this study is to review the public policies used to support the development of renewable energy in romania over the past ten years romania assumed a target of 24 share of renewable energy in consumption in 2020 higher than the average target of the european union and this target has already been reached in the beginning of 2014 as a result of the public policies implemented therefore this study examines firstly the support schemes for the development of renewable energy in the european union underlining the arguments to support the renewable energy as well as the main barriers for its development secondly this study analyses the renewable energy sector in romania in terms of theoretical and economic potential production and consumption of renewable energy and legislation related to the renewable energy thirdly this study discloses the main issues of the public renewable energy policy in romania starting with an overview of the tradable green certificates system and revealing the changes of the romanian support scheme and the possible effects of the policy changes the results of the present study may be useful for further research regarding public policies for the development of renewable energy projects

endogenous market incompleteness without market frictions dynamic suboptimality of competitive equilibrium in multiperiod overlapping generations economies abstract in this paper we show that within the set of stochastic three period lived olg economies with productive assets such as land markets are necessarily sequentially incomplete and agents in the model do not share risk optimally we start by characterizing perfect risk sharing and find that it requires state dependent consumption claims which depend only on the exogenous shock realizations we show then that the recursive competitive equilibrium of any overlapping generations economy with weakly more than three generations is not strongly stationary this then allows us to show directly that there are short run pareto improvements possible in terms of risk sharing and hence that the recursive competitive equilibrium is not pareto optimal we then show that a financial reform which eliminates the equity asset and replaces it with zero net supply insurance contracts arrow securities will implement to pareto optimal stochastic steady state known to exist in the model finally we also show via numerical simulations that a system of government taxes and transfers can lead to a pareto improvement over the competitive equilibrium in the model

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

misreading liberalisation and privatisation the case of the us energy utilities in europe in response to energy market liberalisation and privatisation initiatives promoted by the eu and other european states in the 1990s a large number of us energy utilities expanded their activities in europe mainly through acquisitions the size of their investment was a decade later matched by the ensuing scale of their retreat wealth destruction and often forced exit combining interviews industry studies published financial data and company reports this article examines critically their strategy and in light of widespread failures seeks to answer the question of what went wrong it is argued that mistakes might have been avoided through greater appreciation of how market liberalisation evolves given changing government priorities and general sovereign risk

the use of the balance of payments as a shock absorber in fixed rate and managed float systems abstract this paper analyzes the use of the balance of payments as a shock absorber in fixed and managed exchange rate regimes the analysis is conducted in a monetary intergenerational model it shows that the balance of payments can be used to smooth consumption and raise the welfare of individuals the paper also justifies the stabilization of consumption as a policy goal achieved through the balance of payments mechanism

do regulation and ownership drive the efficiency of electricity distribution evidence from latin america abstract we analyze the impact of alternative regulatory regimes on the labor productivity of electricity distribution firms in latin america we find that i incentive based regimes lead to higher labor productivity than rate of return regulation and ii privatized firms operating under rate of return have at most similar labor productivity as public firms

a rational economic model of paygo tax rates abstract we argue that paygo rates are determined by a representative agent and a benevolent government jointly maximizing the expected life time utility of the agent the distributions of labor and capital income are calculated from national data on real gdp real wages and the real return to capital since 1950 with uniform risk aversion predicted rates explain 83 of the variance of observed rates the globalization of capital markets would lead to convergence of paygo rates our results are immune to crises like 2008

energy policy and european utilities strategy lessons from the liberalisation and privatisation of the energy sector in romania in the context of energy sector reforms pursued by romanian government since 1990s we compare and contrast the market outcomes of european utilities investment with the host government policy objectives we begin with energy market reform in romania and review governments efforts to attract foreign direct investment fdi and to gradually withdraw from the distribution and supply segments of electricity market subsequently we illustrate the scope european utilities have had market policy and design notwithstanding for consolidating market power through regional dominance we examine the extent to which these utilities have sought to enhance their positions through horizontal and vertical integration counter to the eu plans for a competitive market structure we find that the investments of european incumbents have not been resoundingly successful although market entrance may have been justified on long term strategic grounds in the immediate term segments acquired through competitive auctions have yielded modest regulated returns finally we discuss the extent to which policy makers have achieved their goals although the short term benefits of a competitive market structure have reached some consumers a renewed interest in promoting national champions reflect frustration with market mechanisms as a means of ensuring long term strategic investments in the sector

the forward exchange market speculation and exchange market intervention this paper examines two issues the first is the role of speculation in stabilizing the economy against stochastic disturbances increased speculation i stabilizes domestic income against disturbances in the domestic bond market and forward exchange market ii exacerbates the effect of foreign disturbances and iii may dampen or augment the effect of money market and output supply disturbances the second issue is the role of the forward market in stabilization policy forward market intervention does not provide monetary authorities additional leverage in stabilizing income beyond unsterilized spot market intervention intervention rules based on reactions to both the forward and the spot exchange rates however can outperform intervention policies responding to the spot rate alone regardless of the market in which intervention occurs

the effects of location and sectoral components of economic growth on poverty evidence from indonesia abstract in this paper we investigate the relationship between economic growth and poverty reduction by differentiating growth and poverty into their sectoral composition and urban rural location using data from indonesia we find that rural services growth reduces poverty in all sectors and locations however urban services growth has the largest effect on poverty in most sectors finally we also find that rural agriculture growth strongly reduces poverty in rural areas the largest contributor to poverty in indonesia this implies that while agriculture growth in rural areas still plays a major role in reducing poverty policies that enable strong growth in the services sector in both urban and rural areas would expedite poverty reduction

optimal government finance policy and exchange rate management in a stochastically growing open economy abstract optimal monetary policy is analyzed in a stochastic small open economy consisting of risk averse representative agents the analysis shows how optimal monetary policy should be directed toward an optimal interest rate target this target which maximizes the intertemporal utility of the representative agent is determined by balancing off the marginal gains of a higher interest rate on increased growth and the future consumption it generates against the marginal losses stemming from a reduction in the holdings of real money balances the paper shows how an appropriately set monetary growth rate eliminates the need for continuous intervention in the exchange market

aspects of monetary and banking theory and moral hazard we consider two problems in monetary and banking theory in this paper the first of these deals with differences between monetary and tax transfer resolutions of risk sharing problems in overlapping generations 12 15 models of fiat money under uncertainty our second contribution the scenario for which is also motivated in part by interventions needed for risk sharing reasons is an attempt to provide a rationale for interest rate controls on the liabilities of intermediaries that invest in risky assets both models consider environments in which uncertainty exists private markets are incomplete and most importantly some material payoff relevant actions are not perfectly observable the goal of this research is to provide further momentum to theoretical developments that serve to integrate information based models of investment and intermediation with theories of unbacked fiat money and the control of monetary institutions in recent years there has been a great deal of research interest in explicating the micro economic foundations of fiat money i e valued government created assets which are unbacked by payoffs from productive investments or taxes and the uniqueness and criteria for regulation of depository intermediary firms important contributions have been among others the works of bryant 3 the papers in kareken and wallace 7 fama 6 merton 10 and diamond and dybvig 5 asymmetric information based foundations of intermediary functioning have been provided by the papers of leland and pyle 9 followed by diamond 4 in most of this work there has usually been a dichotomy between models that focus on providing and analyzing a role for fiat money and those which analyze the rationale regulation and pricing of capital market intermediaries and their contracts regrettably we persist in having this dichotomy in our work some recent work like fama 6 does merge these two aspects however by emphasizing perfect information complete market environments in which the financial structure irrelevance theorems of modigliani and miller 10 apply models of unbacked fiat money many different types of which are to be found in kareken and wallace 7 can be usefully dichotomized as being of two types in the first fiat money serves the function of opening up or expanding trading opportunities among contemporaneously living agents who have endowment

why has economic growth been more pro poor in some states of india than others abstract we use 20 household surveys for india s 15 major states spanning 1960 1994 to study how the sectoral composition of economic growth and initial conditions interact to influence how much growth reduced consumption poverty the elasticities of measured poverty to farm yields and development spending did not differ significantly across states but the elasticities of poverty to urban and rural non farm output varied appreciably and the differences were quantitatively important to the overall rate of poverty reduction states with higher elasticities did not experience higher rates of non farm growth the non farm growth process was more pro poor in states with initially higher literacy higher farm productivity higher rural living standards relative to urban areas lower landlessness and lower infant mortality

political intergenerational risk sharing abstract in a stochastic two period olg model featuring an aggregate shock to the economy ex ante optimality requires intergenerational risk sharing we compare the level of intergenerational risk sharing chosen by a benevolent government and by an office seeking politician in our political system the transfer of resources across generations is determined as a markov equilibrium of a probabilistic voting game low realized returns on the risky asset induce politicians to compensate the old through a payg system this political system typically generates an intergenerational risk sharing scheme that is i larger ii more persistent and iii less responsive to the realization of the shock than the social optimum this is because the current politician anticipates her transfers to the elderly to be compensated by future politicians through offsetting transfers and hence overspends

estimating the relative benefits of agricultural growth on the distribution of expenditures does the sectoral composition of aggregate economic growth affect poverty we ask whether agricultural growth in developing countries increases the expenditures of poorer households more than growth in other sectors while some reduced form analyses have tackled this question using either country level time series data regional panel data for one country or cross sectional country data this paper is unusual in using panel data for many countries we improve on much of the existing literature by devising an instrumental variables strategy to correct for the endogeneity of sectoral gdp growth involving averaging over sectoral income growth rates for neighboring countries our principal finding from our instrumental variable estimator is that the estimated elasticities associated with growth in agricultural income are significantly greater than for non agricultural income for all but the extreme top and bottom deciles in the middle range of the income distribution the effect of a given gdp growth due to agriculture is 3 4 times larger than if it was due to non agricultural activities having established that on average growth in gdp originating in agriculture is more beneficial for poorer deciles we finally explore whether this is a pattern which holds across different groupings of countries a second important finding is that there is heterogeneity across some groupings most particularly we find that it is the poorest people in the poorest countries for whom agricultural income growth is the most beneficial

why have some indian states done better than others at reducing rural poverty the unevenness of the rise in rural living standards in the various states of india since the 1950s allowed the authors to study the causes of poverty they modeled the evolution of average consumption and various poverty measures using pooled state level data for 1957 91 they found that poverty was reduced by higher agricultural yields above trend growth in nonfarm output and lower inflation rates but these factors only partly explain relative success and failure in reducing poverty initial conditions also mattered states that started the period with better infrastructure and human resources with more intense irrigation greater literacy and lower infant mortality rates had significantly greater long term rates of consumption growth and poverty reduction by and large the same variables that promoted growth in average consumption also helped reduce poverty the effects on poverty measures were partly redistributive in nature after controlling for inflation the authors found that some of the factors that helped reduce absolute poverty also improved distribution and none of the factors that reduced absolute poverty had adverse impacts on distribution in other words there was no sign of tradeoffs between growth and pro poor distribution

social security taxation and intergenerational risk sharing the life cycle hypothesis has become the dominant mode used to analyze the effects of a social security system on private saving the labor leisure choice and social welfare as both barro and samuelson indicate a fully funded social security program in a world of certainty would drive out an equivalent amount of private saving if the interest rate is r the effects of a payment of a dollar into the social security pool while young would just offset the effects of receiving 1 r dollars as a transfer when retired papers by diamond hi and samuelson among others have examined the effects of non fully funded social security schemes in a growing economy a non fully funded program can be used to alter the private sector s saving rate and hence the capital labor ratio social security then can be used as a policy tool for achieving the or some variant of the golden rule growth path this abstract was borrowed from another version of this item

the composition of growth matters for poverty alleviation this paper contributes to explain the cross country heterogeneity of the poverty response to changes in economic growth it does so by focusing on the structure of output growth the paper presents a two sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers wages and thus poverty alleviation then it presents cross country empirical evidence that analyzes first the differential poverty reducing impact of sectoral growth at various levels of disaggregation and the role of unskilled labor intensity in such differential impact the paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation with the largest contributions from labor intensive sectors such as agriculture construction and manufacturing the results are robust to the influence of outliers alternative explanations and various poverty measures

global income inequality this paper presents a non technical summary of the current state of debate on the measurement and implications of global inequality inequality between citizens of the world it discusses the relationship between globalization and global inequality it shows why global inequality matters and proposes a scheme for global redistribution

on the relationship between the exchange regime and the portfolio rules of optimizing agents the paper utilizes the overlapping generations framework to derive demand functions for money and capital we show that many of the macroeconomic comparisons of alternative exchange regimes are not legitimate since changing the exchange regime alters the portfolio rules of rational agents one cannot simply postulate a set of asset demand equations and then hold various income interest rate and wealth elasticities constant when the exchange regime changes having derived the demands for money and capital from optimizing behavior we show how changing the exchange regime affects expected capital holdings and expected utility levels of optimizing agents

optimal and time consistent exchange rate management in an overlapping generations economy abstract this paper analyzes exchange rate management in a simple overlapping generations model this framework is used to evaluate alternative policies in terms of their implications for the welfare of individuals in the economy and for generating seigniorage when the chief concern is to provide a desirable store of value a policy of fixing the exchange rate does better when shocks are primarily of domestic origin while floating becomes more desirable when foreign shocks predominate the same is true when the government is concerned with maximizing total expected seigniorage although more intervention is typically desirable when generating seigniorage is the major objective when seigniorage concerns are paramount and when the monetary authority cannot establish a reputation for conducting monetary policy in a way that makes the currency a desirable store of value a national currency may not be viable in the absence of exchange controls such controls may be justified in this situation

taxation of corporate capital income tax revenues versus tax distortions this paper shows that when uncertainty is taken into account explicitly taxation of corporate income can leave corporate investment incentives and individual savings incentives basically unaffected in spite of the sizable tax revenues collected in some plausible situations such taxes can increase efficiency the explanation for these surprising results is that the government by taxing capital income absorbs a certain fraction of both the expected return and the uncertainty in the return while investors as a result receive a lower expected return they also bear less risk when they invest and these two effects are largely offsetting

the evolving role of agriculture in poverty reduction an empirical perspective abstract the role of agriculture in development remains much debated this paper takes an empirical perspective and focuses on poverty as opposed to growth alone the contribution of a sector to poverty reduction is shown to depend on its own growth performance its indirect impact on growth in other sectors the extent to which poor people participate in the sector and the size of the sector in the overall economy bringing together these different effects using cross country econometric evidence indicates that agriculture is significantly more effective in reducing poverty among the poorest of the poor as reflected in the 1 day squared poverty gap it is also up to 3 2 times better at reducing 1 day headcount poverty in low income and resource rich countries including those in sub saharan africa at least when societies are not fundamentally unequal however when it comes to the better off poor reflected in the 2 day measure non agriculture has the edge these results are driven by the much larger participation of poorer households in growth from agriculture and the lower poverty reducing effect of non agriculture in the presence of extractive industries

dynamic exchange rate equilibria with uncertain government policy in this paper we link two exchange rate literatures by showing how threats of asset controls yields determinate exchange rates in general equilibrium models with otherwise perfect capital markets and by showing how for certain sequences of threats exchange rate determination may be well explained by monetary variables we find that in general there exists no natural exchange rate and market rates may be sensitive to changed perceptions about future exchange rate intervention

informational diversity over time and the optimality of monetary equilibria abstract the temporal realizations of a random state variable in an overlapping generations model create an informational diversity between members of different generations and require a reexamination of the optimality that competitive equilibria might display in such an environment using an optimality criterion that reflects this informational diversity we prove the optimality of competitive equilibrium in a model with a fixed stock of fiat money a single spot market and good endowments that follow a markov process the need for an optimality criterion that incorporates informational diversity is further motivated by studying the same model with the operation of complete contingent commodities markets

dynamics of a floating exchange rate regime we study the full equilibrium dynamics of a two country world economy with a floating exchange rate traded and nontraded goods and explicit modeling of the use of money the resulting exchange rate equation depends on several details of the economic structure such as the supply structure and propensities to spend on various goods although real exchange rate movements have the usual association with the current account the ordinary exchange rate may appreciate or depreciate when there are deficits on current account even when the quantities of money do not change deviations from purchasing power parity and the fisher equation are shown to be the rule rather than the exception

a positive theory of social security in many countries social security accounts for a large fraction of the government budget why is this so given that at any point in time the number of recipients of social security benefits is smaller than the number of contributors in the overlapping generations model studied in this paper all individuals currently alive vote on social security in every period in equilibrium the size of social security is larger the greater is the proportion of elderly people in the population and the greater is the inequality of pre tax income within each generation both predictions of the theory are supported by the empirical evidence in cross country data

currency substitution in a production economy abstract this paper examines a small open economy with endogenous employment using an intergenerational model under floating rates risk averse workers enhance their welfare through currency substitution workers currency substitution behavior produces a phillips curve with anticipated exchange rate movement and domestic inflationary expectation as explanatory variables the dependence of the level of equilibrium employment on the terms of trade is demonstrated finally the association between exchange rates and current accounts is examined in relation to the role of money

beyond agriculture versus non agriculture decomposing sectoral growth poverty linkages in five african countries summary africa s development debate is often cast as agriculture versus non agriculture with agriculture s proponents arguing that agricultural growth is more effective at reducing poverty this dual economy perspective overlooks the heterogeneity within and synergies between these two broad sectors recent studies decompose agriculture into subsectors and find that agricultural growth led by smallholder farmers is even more effective at reducing poverty than larger scale estate farms in contrast few studies estimate subsectoral growth poverty linkages for non agriculture yet we strongly expect for example that growth led by informal traders or foreign owned mining companies will have quite different implications for poverty reduction different perspectives on what constitutes non agriculture might therefore explain divergent views on its relative importance for poverty reduction to address this gap in our understanding we estimate sectoral poverty growth elasticities using economy wide models for five african countries while our estimated elasticities are higher for agriculture than for non agriculture as a whole the extent to which this is true varies considerably across nonagricultural subsectors and across countries we find that the poverty growth elasticities for trade and transport services and manufacturing especially agro processing are often close to and sometimes exceed agriculture s this means that growth led by these nonagricultural subsectors might be as effective as agriculture at reaching the poor this confirms the need for a more nuanced treatment of non agriculture in africa s policy debate and may explain conflicting perspectives on agriculture s role vis a vis non agriculture