the secondary market and the international debt problem abstract the objective of this study is to analyze the new secondary market of developing country debt we provide a brief description of the market participants instruments and purposes an analysis of prices in the secondary market follows we are especially concerned about the recent plunge in secondary market prices and whether it reflects fundamentals such as movements in debt to export ratios and suspensions of interest payments or simply the illiquidity of the market we find that both sets of factors are involved and as a result conclude that prices on the secondary market are probably below their long run equilibrium values in the next section we review the risks inherent in using the secondary market for debt from a developing country point of view and discuss the market s near term potential growth we conclude with some general remarks about the role of the secondary market in resolving the international debt problem that is in restoring capital flows to developing countries

money demand and seigniorage maximizing inflation conventional estimates of the seigniorage maximizing inflation rate often make use of the cagan form which implies a constant semielasticity of money demand with respect to inflation this paper shows that the elasticity of substitution in transactions between money and bonds determines how the inflation semielasticity of money demand changes as inflation rises allowing for a variable semielasticity estimates of seigniorage maximizing inflation for a panel of eleven high inflation countries are lower than those obtained by using the cagan form estimates based on the correct measure of the opportunity cost of money also differ sharply from those obtained when using conventional inflation measures copyright 1995 by ohio state university press

fiscal policies in eastern europe we focus on the role of fiscal policies in macroeconomic stabilization in eastern europe and assess the sustainability of fiscal policies for the central and eastern european economies in transition we show the main causes of fiscal imbalances experienced at the beginning of the transition process countries that adopted tight fiscal policies were more successful with their inflation stabilization programmes have experienced a faster recovery of growth and did not experience a steeper decline in output countries with unsustainable fiscal policies all floated their exchange rate but there are both floating and peg arrangements among the successful stabilizers in all the successful cases however current account convertibility was established we also discuss the experience of poland and romania two polar cases in terms of fiscal policies and present lessons and policy recommendations for other economies in transition copyright 1997 by oxford university press

exchange rates inflation and money supply in turkey abstract a radical reform package has been implemented in turkey in the post 1980 era involving simultaneously short run adjustment and transition to an outward oriented regime a major area where the programme has failed to register a significant success has been in the sphere of inflation high and volatile rates of inflation continue to be a characteristic feature of the turkish economy this paper seeks to explain the persistence of this phenomenon with reference to the interactions between exchange rate price level and money supply the study employs monthly data and the period under consideration is january 1981 to december 1987 distinguished by managed exchange rate flexibility results of a four variable vector autoregressive model are presented and analyzed these in turn provide the basis for a small scale model in which high powered money price level exports and the exchange rate are simultaneously explained judged in terms of its overall fit the model appears to be quite successful in accounting for the persistence phenomenon in the post 1980 period

maximum likelihood estimation of cointegration in exchange rate models for seven inflationary oecd countries abstract we apply the johansen technique to estimate cointegration in a monetary exchange rate model modified for real exchange rate fluctuations and applied to seven inflationary oecd countries we generally find one or more cointegrating vectors and the signs of their coefficients are broadly consistent with the modified monetary model the adjustment coefficients are also examined our statistical testing is based on bootstrapping and generates much more conservative rejection criteria than the use of asymptotic critical values even after a substantial degree of freedom correction power estimates are also presented finally we conclude that the monetary model unmodified for real exchange rate fluctuations would be inadequate

rational ponzi games when can a government run a rational ponzi game i e issue debt and never pay back any interest or principal the transversalit y condition of each individual implies that such schemes require an i nfinity of lenders given this horizons are unimportant ponzi games cannot be ruled out by assuming that agents have infinite horizons the authors point out both the basic similarity of and some key diff erences between rational ponzi games and asset price bubbles or fiat money regarding international debt the analysis implies that what matters for the feasibility of rational ponzi games are conditions in the lenders not the borrowers economy copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

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

strategic aspects of exchange rate policy in a developing country abstract in an economy facing inflation and external deficit the non cooperative behavior of the players introduces an inflationary bias which is eliminated if the government acts as a stackelberg leader the terms of trade is altered only with excess supply in the non traded goods sector through fiscal contraction

a three gap model of foreign transfers and the gdp growth rate in developing countries abstract a simplified macroeconomic framework is developed for the fiscal gap which is considered to be an important stumbling block for adjustment with growth in highly indebted developing countries distinctive characteristics of a fiscally constrained economy are compared with those of economies constrained either by the availability of savings or foreign exchange tentative implications for external conditionality accompanying debt relief measures are derived

macroeconomic effects of anticipated devaluations with informal financial markets abstract the paper analyzes the macroeconomic effects of devaluation in a general equilibrium model of a developing country in which controls on interest rates and foreign exchange restrictions lead to the emergence of informal financial markets the complexity of the model precludes an analytical treatment a simulation approach based on parameters derived from estimates in the existing literature is used to explore how the existence of informal financial markets causes the effects of an official devaluation to be felt before the devaluation itself occurs

real exchange rate targeting and inflation in turkey an empirical analysis with policy credibility abstract in this paper we make an empirical investigation into the conflict among objectives under a real exchange rate policy i e between the trade balance and domestic inflation this occurs when the nominal exchange rate is managed to achieve a certain level of the real exchange rate in order to main external competitiveness our empirical analysis draws on the turkish case whereby the exchange rate has been the key policy instrument since the 1980s the results from the simulation experiments with a well defined macromodel where the devaluation expectations are explicitly considered indicate moderate inflationary consequences of a real exchange rate policy based on the relative purchasing power parity ppp rule in turkey moreover a real exchange rate appreciation is found to be contractionary these are common characteristics of the demand determined output case another major conclusion is that the exchange rate policy can provide an anchor for price stability only if it is credible

time consistent collection of optimal seigniorage a unifying framework this paper reviews the existing literature on the time consistency problem of seigniorage collection when monetary policy is determined by optimal taxation considerations it develops a unifying accounting framework and suggests a general measure for seigniorage which encompasses the standard measures employed in the literature in addition the ex ante optimal solution to the optimal taxation problem is derived and interpreted in relation to the ramsey principle we show that the different recommendations of the public finance literature i e the friedman rule of optimal deflation moderately positive inflation and seigniorage maximizing inflation are specific solutions to the optimal taxation problem the paper continues with a formal illustration of the time consistency problem of the ex ante optimal policy and the characterization of the time consistent solution under discretion as possible solutions to the time consistency problem we consider reputational forces institutional reforms that establish central bank independence and specific ways of asset and debt management in particular it is formally shown that a modified version of the asset and debt management scheme suggested by persson persson and svensson is not only necessary but also sufficient for optimality although this did not hold in their model

are the heavily indebted countries solvent tests of intertemporal borrowing constraints abstract this paper investigates whether the heavily indebted countries hics in consideration of their external debt repayments remain solvent direct tests of the solvency condition derived from the usual intertemporal budget constraints shed light on the sustainability of their current policies the findings are twofold first the hics seem to have a debt overhang problem second in east and southeast asian countries except philippines the solvency conditions are satisfied these results give a rationale for the debt reduction plan a k a the brady plan and the empirical support of the debt overhang hypothesis

economic fundamentals and self fulfilling crises further evidence from mexico abstract this paper considers a model of debt stabilization under a fixed exchange rate in which a currency crisis can develop as the result of self fulfilling speculation following a bifurcation in the behavior of economic fundamentals based on this theoretical framework and by exploiting the test developed by jeanne 1997 this paper provides evidence that self fulfilling speculation was at work in the 1994 mexican crisis in terms of fundamentals we show that the critical variables in generating the mexican crisis were the fast rise in us denominated public debt tesebonos the appreciated real exchange rate and the small rises in unemployment and primary deficit

fiscal deficits output growth and inflation targets in ghana abstract inflation appears to be the macro problem for which no antidote has been found under the economic recovery programme it is possible that either a wrong diagnosis has been made of the problem or that certain factors within the economy are preventing inflation from staying within target levels using an error correction model ecm the paper estimates an inflation equation for ghana the convenience of this model is in the fact that all the data series exhibit an autoregressive scheme of order one that is they are i 1 series in such an instance the granger engle theorem shows that the ecm provides the most efficient model further the ecm unveils some of the short run dynamics which are missing in other estimation techniques the results of the econometric regression show that inflation in ghana either in the long run or short run is influenced more by output volatility than by monetary factors an examination is made of the consistency of fiscal deficit the hypothesis is that an unsustainable fiscal policy would make government miss some macroeconomic targets it is shown that in 1985 and 1989 fiscal policy was consistent inflation was well within target in 1985 for 1986 1988 the government did not maintain consistent fiscal deficits and inflation in those years was well above targets it is recommended that to control inflation in ghana more attention should be paid to supply factors further government should pursue consistent fiscal policies

the structure and policy implications of a macroeconomic model of ghana abstract to avoid the ad hoc use of abstract theoretical specifications and disjointed statistical data for policy analysis an internally consistent macro framework is indispensable the absence of a forecasting macro model of ghana is the reason for the use of the international monetary fund and the world bank models for policy analysis and forecasting after having reviewed the relevant literature we construct a macro model we divide our macroeconomic system into three blocks of eight sectors the full model consists of 47 identities and 50 behavioural equations we also analyzed the policy implications of the empirical model

inflation and the financing of government expenditure an introductory analysis with an application to turkey this article presents a simple framework to assess the consistency of appropriately defined fiscal deficits with other macroeconomic targets such as inflation it also considers the relation of fiscal deficits to output growth real exchange rate developments and management of internal and external debt finally it considers the implications of relying on interest bearing government debt to postpone the adjustment necessary to restore consistency with inflation targets it demonstrates how the intertemporal budget constraint of the government creates a tradeoff between current and future adjustment real interest rates and output growth rates are shown to determine the terms at which this tradeoff takes place the usefulness of this framework is demonstrated through an analysis of fiscal policy options in turkey in 1985

on the sustainability of external debt is debt relief enough elaborating on pasinetti 1998 the geometry of debt sustainability gds represents an analytical tool for the analysis of the long term sustainability of foreign debt the paper focuses on debt sustainability in low income countries which face several major challenges simultaneously achieving economic growth consolidating human development goals and meeting regular debt service payments the gds reveals how the structural aspect of debt sustainability as indicated by trends in the non interest current account is closely interlinked with sustainability from a financial point of view as indicated by the relationship between the growth and the interest rate the gds shows why both debt cancellation and additional aid are necessary to give indebted low income economies a chance to improve their long term economic viability

a survey of the literature on the optimal peg abstract it is widely agreed that floating is not an appropriate exchange rate policy for most developing countries but in a world of generalized floating the question of exchange rate policy is not resolved by deciding to peg rather than to float it is also necessary to decide to what to peg this is the question of the optimal peg on which a significant literature has emerged since 1976 the present paper provides a survey of that literature section 2 summarizes the principal papers section 3 compares the objectives and rules advocated by different authors section 4 evaluates the alternative approaches arguing that in general the peg should be chosen to stabilize the nominal trade weighted effective exchange rate section 5 considers whether this criterion points to the sdr as a satisfactory peg

growth equity and the environment in chile issues and evidence abstract chile has grown at an annual rate of 7 over the past decade income distribution however deteriorated for the poor and middle class before the economy reached full capacity when real wages began to rise and unemployment to fall growth has been export led putting pressure on stocks of native forests and fishery and mining resources environmental quality worsened before 1990 reversing these trends would require extra investments on the order of 1 of gdp over many years

the management of the developing countries debt guidelines and applications to brazil some principles which may be useful in formulating a debt management strategy are articulated there are four major policy recommendations 1 stretch out the repayment of the debt 2 monitor both exports and gdp 3 ignore the capital loss of the creditors and 4 watch the domestic deficit the goal of the recommendations is the maximization of the intertemporal welfare of the country under the constraint that it services its debt

fiscal policy and the current account deficits and trade jose vinals does the balance of payments act as an external constraint on the design of domestic economic policy in practice most governments believe it does yet popular discussion is sometimes confused this paper begins by evaluating the nature of the external constraint and the extent to which it can adequately be measured by the current account of the balance of payments it is often argued that a fiscal expansion will increase employment it is also widely held that a fiscal expansion necessarily leads to a deterioration of the current account while these propositions may hold in specific circumstances neither is generally true the theoretical basis of the two propositions is examined and compared with recent international experience when important changes in fiscal stance occurred the popular presumptions are confirmed by recent experience in the us the uk and germany but france is a counterexample to the first and spain to the second the important policy implication is that one can identify both in theory and in practice clear circumstances in which expansionary fiscal policy is appropriate and will not be thwarted by external considerations

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

product market regulation innovation and distance to frontier this article contributes to the literature on competition and innovation it tests the impact of market regulation on innovation conditional to the closeness to the technological frontier with a panel of 15 industries for 17 oecd countries over the period 1979 2003 one of the main conclusions of this literature is that of a negative impact of regulation growing in intensity with the proximity to the frontier a simple model of innovation and growth shows that one should not necessarily expect this result empirical tests on a variety of pecifications show that the impact of regulation can be positive when industries are close to the technological frontier we argue that this result is in fact line with previous evidence

regulation by prices quantities or both a review of instrument choice choosing appropriate policy instruments is an important part of successful regulation once objectives are agreed and suitable targets adopted policy makers can employ command and control regulation and or economic instruments and choose between fixing a price or a quantity this paper examines the relative advantages of price quantity and hybrid instruments according to their efficiency under uncertainty the trade off between credible commitment and flexibility implementation international considerations and political economy various illustrations of the theory are provided with two detailed applications to climate change and transport policy specifically congestion and safety pricing

debt deficits and inflation an application to the public finances of india abstract the paper studies the solvency of the indian public sector and the eventual monetization and inflation that would be implied by stabilization of the debt gnp ratio in the absence of changes in the primary deficit the nonstationarity of the discounted public debt suggests that indefinite continuation of the pattern of behavior reflected in the historical time series process is inconsistent with the maintenance of solvency this message is reinforced by the recent behavior of the debt gnp ratio and of the ratio to gnp of the sum of the primary budget surplus and seigniorage our estimates of the base money demand function suggests that even maximal use of the inflation tax would not be sufficient to restore solvency measures to reduce the primary deficit are therefore unavoidable

a critical evaluation of exchange rate policy in turkey abstract this paper reviews and critically evaluates the exchange rate policy followed in turkey in the post 1980 period during which a far reaching program of liberalization has been launched we conclude that the new exchange rate policy has been essential for turkey s regaining its creditworthiness furthermore it has positively contributed to growth of output and exports and to expansion of tradables production relative to nontradables persistence of inflation and weakness of private investment in tradables overshadow the successes recorded in other areas and cast doubt over the sustainability of turkey s outward orientation we argue that the root cause of these problems has been inconsistencies between overall economic policies rather than the exchange rate policy itself we compare the period of real appreciations since late 1998 with the earlier period of real depreciations and draw policy implications

external debt inflation and the public sector toward fiscal policy for sustainable growth which tradeoffs are involved in formulating an external debt strategy should expenditure be cut to improve the current account or will this reduce future output growth thus undermining the benefits of any debt reduction are there alternatives that allow satisfactory output growth without jeopardizing creditworthiness how can the necessary surplus of savings over investment be brought about at levels of investment high enough to sustain output growth should the government contribute to the internal adjustment by reducing its deficit macroeconomic targets for inflation and growth and creditworthiness constraints on debt issue impose restrictions on the extent to which deficits can be financed can the government cover the deficit within these targets and constraints the absence of such consistency forebodes future policy change and so undermines the credibility of the adjustment program the author uses empirical work on turkey to illustrate the interactions between fiscal deficits and the macroeconomic variables upon which fiscal consistency hinges

intergenerational earnings mobility inequality and growth abstract we examine a model in which per capita income inequality intergenerational mobility and returns to education are all determined endogenously individuals earn wages depending on their ability which is a random variable they purchase an education with transfers received from their parents and are subject to liquidity constraints in the model multiple steady state equilibria are possible countries with identical tastes and technologies can reach differing rates of mobility inequality and per capita income equilibria with higher levels of output also have lower inequality higher mobility and more efficient distribution of education

towards a better climate treaty the kyoto protocol is an example of how not to construct a treaty negotiators began by focusing on the short term agreeing that the industrialized countries should cut their emissions of greenhouse gases by about 5 relative to 1990 by 2008 2012 then they agreed that these cuts should be achieved cost effectively incorporating flexible mechanisms only later did they worry about whether the treaty created incentives for broad participation and full compliance negotiators should have approached things the other way around they should have begun by thinking of how they could achieve both broad participation and full compliance and of how they could reduce emissions in the long term had they done so a better more effective treaty would have been negotiated in this essay the author explains why kyoto is unlikely to succeed in mitigating climate change he also proposes an alternative treaty design that is likely to work better

the sustainability of current account deficits abstract this paper proposes a new method of determining whether a country is likely to be able to sustain its current account deficits without defaulting on its debt it is based on the notion of the national intertemporal budget constraint ibc which is derived from a forward solution of the balance payments identity although the problem is formally similar to that considered in the literature on the government ibc a more general solution is obtained by allowing the primary deficit to be endogenous instead of exogenous it is shown that the existence of negative feedback from net indebtedness to the primary deficit a wealth effect is sufficient this method supplants the ad hoc approach previously adopted in the current account literature whilst many of the same variables appear a formal structure for analysing them is provided

how to evaluate the solvency of an indebted nation reassessing third world debt daniel cohen the conventional measures of the solvency of developing countries usually rely on such indices as debt export or debt gnp ratios the underlying rationale is that to be solvent a country must eventually pay back all its debt this paper starts from two simple but important remarks first solvency need not require the full eventual repayment of all debt continued borrowing may be possible rather what is required is that a country s debt accumulation does not outstrip its capacity to make future repayments and the capacity of lenders to make future loans second solvency therefore cannot be defined independently of the growth rates of lender and borrower countries nor of the interest rate at which past debts accumulate putting these ideas together a new solvency index is proposed and this is computed for all the less developed countries this new index suggests a less gloomy view of the international debt crisis the largest debtors may have already accomplished an adjustment which is more than sufficient to restore their solvency when this is properly computed to investigate this claim there is a detailed analysis of the policies recently adopted in argentina and brazil

fiscal adjustment and stabilization policies the polish experience to an extent at least economic stabilization must come first this is the case both because high inflation if it exists is so destructive that no policy maker recognizing its effects could accept the continuation of inflationary pressure without taking measures to fight it and from the evident truth that systemic and structural changes need a relatively long time to be accomplished the priority given to economic stabilization means imposing significant constraints on the form of the adjustment programme and on the way it is implemented

structural factors associated with primary fiscal balances in developing countries the study explores the conditions under which a government in a developing country is likely to run a balanced or surplus budget we contend that primary fiscal deficits are likely to persist where the economy is too saving constrained to raise private sector investment to conduct the investigation a logit model is applied to a sample of developing countries to see whether the saving constraints are associated with the fiscal stance of governments accordingly income level growth external current account balance and foreign direct investment are used as indicators of the saving constraint with the exception of economic growth positive developments in these variables turned out to be significant to the likelihood of the government adopting a surplus budget

education technologies wages and technological progress abstract we analyze the worker s incentives to acquire skills under technological progress when the costs of education are endogenous and depend on the wage distribution we show that the agent s intergenerational elasticity of substitution plays then a relevant role in determining how incentives and the long run wage distribution react to technological progress moreover whenever poverty traps of unskilled workers exist higher rates of technological progress can even decrease the incentives of low skill workers to acquire skills we also analyze the effects of educational subsidies in contrast with previous analytical findings we obtain that subsidies always decrease the long run skill premium finally we study the efficiency of the resulting competitive equilibria

current account deficit sustainability the case of barbados this article investigates the sustainability of the current account deficit in barbados over the period 1960 to 2006 various unit root and cointegration techniques are employed to determine whether the country is satisfying its intertemporal budget constraint ibc the cointegration regressions suggest that the current account of barbados is sustainable and that deviations from long run equilibrium between real exports and imports are corrected in the short run with imports making the adjustment

exchange rate based disinflation wage rigidity and capital inflows real exchange rate appreciation usually accompanies stabilization programs based on the exchange rate one thing that causes the real exchange rate to appreciate is the capital inflows that follow liberalization of the capital account and the financial market capital inflows cause the exchange rate to appreciate in part because of the resulting increase in expenditures this appreciation is exacerbated if there is some price rigidity and if control of the money supply is only partial all these conditions existed during chile s experiment with exchange rate based disinflation between 1978 and 1981 simulating what might have been the authors study how exchange rate based disinflation affects expenditures switching and reduction when wages are partially indexed in some segments of the labor market the paper also shows the extent to which a more flexible rule on wage indexing would have offset the adverse impact of lower capital flows on protected sector employment

quantitative approaches to fiscal sustainability analysis this case study of fiscal sustainability in turkey after the crisis in 2001 reviews and extends quantitative approaches to fiscal sustainability analysis and brings them together in a user friendly tool applicable in a data sparse environment it combines a dynamic simulations approach with a steady state consistency approach it also incorporates user defined stress tests and stochastic simulations to deal with uncertainty and it derives the future distribution of debt output ratios evaluating the fiscal adjustment required to stabilize them value at risk analysis shows that considerable risks remain unless explicit feedback rules from debt surprises to the primary surplus are implemented

debt relief and economic growth in mexico could external restraint and internal balance in mexico have been reconciled at levels of savings and investment that allowed satisfactory growth in output without the 1989 90 restructuring of debt what are the likely implications of mexico s brady deal on economic growth what are the macroeconomic effects of debt equity swaps this article develops and estimates a model to address these issues the analysis concludes that the 1989 90 agreement in mexico will contribute materially to macroeconomic stability and the restoration of economic growth copyright 1991 by oxford university press

how should structural adjustment programs be designed abstract more than seven years have elapsed since the onset of the generalized debt crisis of 1982 yet the affected countries have still not managed to stabilize their economies these countries must now attempt structural adjustment in the midst of pervasive macroeconomic and political instability structural adjustment packages should be designed with this reality in mind this paper argues that structural adjustment programs should strive for sustainability rather than the economic liberalization that they presently stress illiberal policies which do not damage overall macro stability are preferable to liberal policies which are inherently unsustainable or engender macro instability liberalization programs that are not sustainable are likely to bring few benefits but have high costs in terms of private investment the paper discusses some of the chief implications of this opinion for the design of adjustment programs

the impact of globalization on rural poverty the paper first reviews the meaning and causes of globalization it indicates that globalization is not a new phenomenon in history but the current phase seems to have new elements that did not exist previously regarding the consequences of the various aspects of globalization at the national level it is shown that there can be both positive and negative aspects in the short and long runs however empirical investigations seem to suggest largely positive implications the structure of poverty in rural areas is subsequently discussed and it is shown that rural poverty takes very different forms in different parts of the world exploring the various aspects of the incomes of the rural poor reveals that there are both opportunities but also dangers of detrimental impacts from global integration on balance it appears that globalization creates both opportunities as well as risks and the impacts on the rural poor will depend on the extent to which they manage to seize the opportunities while managing the increased risks

stabilization policies in developing countries what have we learned abstract the paper reviews the recent experience with stabilization programmes in latin america in the light of traditional and monetarist models of inflation and the exchange rate the traditional model links both inflation and payments problems to budget deficits the monetarist model too believes that inflation is caused by fiscal deficits but it takes a more optimistic view of stabilization full purchasing power parity and perfect capital mobility make stabilization just a question of the appropriate exchange rate policy and the proper rate of domestic credit creation the traditional view is substantially right as a long run model but it fails in the dynamics the monetarist model is as we know now fundamentally wrong as a short run description of the possibilities of inflation control there is need and room for a paradigm that places emphasis on the debt money mix in financing the budget on the stickiness of inflation rates and on the place of short run real exchange rate and real interest rate variations that these are key features of the transition phase is amply borne out by the devasting and unsuccessful experiences with monetarist stabilization in argentina chile and brazil

technology transfer with transboundary pollution a signalling approach there are increasing complaints from the developing world that developed countries seem reluctant to transfer green technology despite its benefits in helping to solve the climate problem identifying a signalling effect of technology transfer that was neglected by the previous literature this paper offers a rationale for this reluctance in a north south model with transboundary pollution in a benchmark case with complete information the north makes complete technology transfer leading to a pareto improvement however if the north s valuation on climate damage is its private information the north does not completely transfer the technology in almost all of the equilibria resume transfert de technologie quand il y a pollution transfrontiere une approche en termes de signaux il y a de plus en plus de plaintes dans le monde en developpement que les pays developpes sont reticents a transferer la technologie verte malgre les avantages que cela procurerait pour aider a resoudre les problemes lies aux changements climatiques identifiant cet effet de signalisation du transfert de technologie qui a ete neglige dans la litterature specialisee ce texte suggere des raisons pour expliquer cette reticence dans un modele nord sud avec pollution transfrontiere dans un cas de figure avec information complete le nord effectue un transfert complet de technologie menant a une amelioration a la pareto cependant si l evaluation du dommage cause par le climat est son information privee le nord ne transfere pas completement la technologie dans presque tous les equilibres

dilemmas of structural adjustment and environmental policies under instability post 1980 turkey abstract the turkish structural adjustment since 1980 has been associated with chronic instability since the late 1980s the weaknesses in the fiscal system and the premature external liberalization emerge as the main factors hindering the passage toward stable growth enforced and erratic distributional changes and relative stagnation of capital accumulation have undermined the growth potential of the economy further it is demonstrated that existing market structures may negate environmental policies based on market incentives these observations as well as those on the interactions of the market system and the environment create strong arguments in favor of an active state

financial policy and speculative runs with a crawling peg argentina 1979 1981 abstract in this paper we present a model of a balance of payments crisis and examine the argentine experiment with a crawling peg between december 1978 and february 1981 the approach taken allows us to examine the evolution of a crisis when a collapse is not perfectly foreseen and yields plausible estimates of one month ahead probabilities of a collapse of the crawling peg the results suggest that the viability of an exchange rate regime depends on the consistency of exchange rate policy with domestic credit policy if the two are not consistent confidence in exchange rate policy is undermined

economic underdevelopment the case of a missing market for human capital abstract this paper demonstrates that the coexistence of developed and underdeveloped countries can be a stationary equilibrium in a world economy with free trade in consumption goods and physical capital an underdeveloped country is characterized by a high ratio of unskilled workers in the labor force a small stock of physical capital a low gross national product a high rate of return on human capital and a corresponding large wage differential between skilled and unskilled workers the critical assumptions are that future labor earnings cannot serve as collateral on a loan and indivisibilities in education

external debt net transfers and growth in developing countries abstract the paper argues for the relevance of the concept of net transfers to analyze the growth constraints in heavily indebted developing countries a conceptual shift is proposed in analyzing the sources of investment financing from the traditional dichotomy between foreign savings and national savings toward a more relevant dichotomy between net real resource transfers and domestic savings at constant prices the consequences of introducing the foreign exchange constraint and the fiscal constraint for the analysis of the impact of foreign transfers are also explored

ability biased technological transition wage inequality and economic growth thispaper develops a growthmodel characterizedbyability biasedtechnological transition in which the evolution of technology education attainment and wage inequality is consistent with the observed pattern in the united states and other advanced countries over the past several decades it argues that an increase in the rate of technological progress raises the return to ability and simultaneously generates an increase in wage inequality between and within groups of skilled and unskilled workers an increase in average wages of skilled workers a temporary decline in average wages of unskilled workers an increase in education and a productivity transitory slowdown

quantitative approaches to fiscal sustainability analysis a case study of turkey since the crisis of 2001 this case study of fiscal sustainability in turkey after the crisis in 2001 reviews and extends quantitative approaches to fiscal sustainability analysis and brings them together in a user friendly tool applicable in a data sparse environment it combines a dynamic simulations approach with a steady state consistency approach it also incorporates user defined stress tests and stochastic simulations to deal with uncertainty and it derives the future distribution of debt output ratios evaluating the fiscal adjustment required to stabilize them value at risk analysis shows that considerable risks remain unless explicit feedback rules from debt surprises to the primary surplus are implemented

technological progress mobility and economic growth this paper analyzes the relationship between technological progress wage inequality intergenerational earnings mobility and economic growth in periods of major technological inventions a decline in the relative importance of initial conditions raises inequality enhances mobility and generates a larger concentration of high ability individuals in technologically advanced sectors stimulating future technological progress and growth however once technologies become more accessible mobility is diminished and inequality decreases but becomes more persistent the reduction in the concentration of ability in technologically advanced sectors diminishes the likelihood of technological breakthroughs and slows future growth user friendliness therefore becomes unfriendly to future economic growth copyright 1997 by american economic association

the relationship between inflation and the budget deficit in turkey this article analyzes the empirical relationship between inflation and the budget deficit for the turkish economy by a multivariate cointegration analysis a single equation model shows that the scaled budget deficit as well as income growth and debt monetization significantly affects inflation in turkey the conditional model of inflation is constant and it encompasses a previously estimated model

exchange rate management and stabilization policies in developing countries abstract we outline three channels via which a devaluation has a direct contractionaly impact on the aggregate supply side of the economy local currency costs of intermediate imports wage indexing in the presence of food imports and reduced volume of real credit to firms contractionary effects via the supply side are more damaging than krugman taylor effects via aggregate demand since a cut in aggregate supply leads to upward pressure on inflation while a cut in aggregate demand tends to abate inflation upward pressure on inflation may over time threaten the increase in competitiveness a nominal devaluation also intends to achieve we also discuss the implications of a substantial foreign debt we demonstrate that a successful devaluation raises the real in terms of domestic goods debt service burden causing a krugman taylor like contractionary effect on aggregate demand we then analyse the effects of a preannounced slowdown of the rate of depreciation our results of course do not imply that a devaluation should never be considered they do suggest however that a devaluation is likely to be an ineffective tool for demand management since it may cut aggregate supply as much or more in the short run

an overview of turkey s experience with economic liberalization and structural adjustment abstract turkey s recovery from its debt crisis during the 1980s provides a good example for study the most successful aspect of turkish experience was the remarkable growth in exports liberal policies were implemented extensively to restructure the economy but in terms of their impact on the real economy the outcome has been disappointing while income distribution deteriorated internal resource mobilization failed to materialize successful growth in exports was only partly influenced by economic policies such as subsidies which fell outside the liberal category under present circumstances where self sustaining growth is increasingly urgent explicit policies targeting private investment have become necessary

how occupied france financed its own exploitation in world war ii can a vanquished country deliver significant resources to its occupier based on the failure of germany to pay its post world war i reparations conventional wisdom generally doubts the possibility yet german reparations represent the exception rather than the rule perhaps the most successful case was the transfer of resources that germany obtained from france during world war ii although they imposed huge payments the victors left the french to decide how to raise the funds after comparing the magnitude of france s payment to other episodes we employ a neoclassical growth model to assess both wartime and postwar policies the burden imposed on the french economy caused it to shrink at a rapid pace curtailing consumption and yielding large debt and money overhangs although vichy france intended to manage the postwar debt burden with higher tax rates the governments following liberation allowed inflation to slash the debt redistributing the adjustment cost higher taxes did not fund the debt but instead paid for expenditures associated with the rise of the welfare state

stabilization with exchange rate management stabilization programs in open economies typically consist of two stages in the first stage the rate of currency devaluation is reduced but the fiscal adjustment does not eliminate the fiscal deficit that causes growth of debt and loss of reserves making a future policy change necessary only later at a second stage is this followed by either an abandonment of exchange rate management or by a sufficiently large cut in the fiscal deficit we study how different second stage policy changes affect economic dynamics during the first stage these changes include tax increases budget cuts on traded and nontraded goods and increases in the growth rate of money

aid growth and devolution summary this paper examines whether the degree of fiscal decentralization in aid receiving countries matters in explaining aid effectiveness the decentralization theorem predicts that the devolution of powers should increase aid effectiveness since local decision makers are better informed about local needs thereby decentralization may also have reverse effects e g through coordination problems excessive regulation administrative costs and local capture we use panel data for up to 60 countries and find that aid contributes to economic growth in centralized developing economies whereas it is less effective or even harmful in decentralized countries the cases of indonesia the philippines and uganda support our findings our results imply that donor countries should carefully consider how the two development instruments foreign aid and decentralization interact

debt sustainability and overadjustment abstract a simple debt accumulation model based on balance of payments identifies is analyzed and used to project debt to export ratios in latin america and africa uo tp 1990 the fundamentals of debt dynamics are shown to be determined by four ratios interest rate to export growth import growth to export growth and the initial debt to export and import to export ratios the relevance of the initial conditions and the importance of import growth on debt dynamics are discussed sustainability of the debt in terms of keeping debt to export ratios on a declining trend is defined and used to quantify the associated amount of excess import restraint in debtor countries two tests are constructed that measure excess restraint i e overadjustment based on the fundamentals of debt dynamics both tests assume that interest rates exceed export growth the first requires a substantial amount of past adjustment effort the second does not but places tighter restrictions on the future commitment that is needed to remain solvent these tests are applied to latin america and to africa both before and after the recent downward oil price shock estimates of excess import restraint are reported

aid policies and growth in developing countries a new look at the empirics the relationship between foreign aid and economic growth has been the subject of much controversy a recent theme suggesting that aid promotes growth but only in a good policy environment has ratcheted up that debate in this paper we assess the importance of policy and aid in generating growth when the aid policy and growth relationship is nonlinear this allows us to examine the varying effects of aid and policy in different data segments which we do without imposing any particular structure on the underlying relationship we find that policy is an important determinant of growth we also find partial corroboration of the view that aid is growth enhancing in a good policy environment and some evidence of diminishing returns to aid these findings suggest that nonlinearities if not appropriately addressed fail to capture the detailed underlying dynamics and thereby mask some key features of the aid policy growth relationship