the exchange rate a shock absorber or source of shocks a study of four open economies abstract the paper provides svar estimates for the uk canada sweden and denmark making explicit a monetary policy reaction function and taking account of exchange rate targeting practices it examines the role of the exchange rate as shock absorber as opposed to a source of its own and destabilizing shocks we find that in all countries but the uk real shocks are predominantly symmetric relative to the neighbor implying little need for the exchange rate to act as shock absorber the shocks arising in the exchange market appear to have played a more important role in denmark than in the other countries

purchasing power parity and the euro area abstract this paper analyzes purchasing power parity ppp for the euro area we study the impact of the introduction of the euro in 1999 on the behavior of real exchange rates we test the ppp hypothesis for a panel of real exchange rates within the euro area over the period 1973 2003 our methodology exploits the cross sectional dependence across real exchange rates and allows for heterogeneity in the rates of mean reversion we present evidence in favor of ppp for the full panel of real exchange rates but we show that accounting for cross country differences within the euro area is essential the unit root hypothesis can be rejected for some real exchange rates but evidence for ppp is weak for others we also investigate ppp between the synthetic euro against several other major currencies over the period 1979 2003 we find support for the ppp hypothesis for the full panel of real exchange rates when the restriction of a common mean reversion coefficient is relaxed we reject the unit root hypothesis for the euro swiss franc rate only we conclude that the process of economic integration in europe has accelerated convergence toward ppp within the euro area

productivity gains from rice genetic enhancements in west africa countries and ecologies abstract many critics claim that public research in west africa has failed to develop technological innovations to improve productivity and stimulate economic development in the agricultural sector using griliches method of estimating the impact of a research induced supply shift this study finds that rice varietal improvement generated a producer surplus gain of approximately us 360 million in 1998 in the seven most important rice producing countries of west africa eighty one percent of this gain has occurred in the irrigated and rainfed lowland ecologies which occupy just 12 and 35 of total regional rice area respectively by contrast approximately us 5 6 million is invested annually in regional varietal improvement research

altruism and time consistency the economics of fait accompli this paper analyzes the strategic and intertemporal interaction between two economic agents who have overlapping concerns such as altruistic concerns for each other s welfare the agents may be two individuals a social bureau and a client or two units in an organization we show how the presence of such common concerns may lead to socially inefficient outcomes in which one economic agent free rides on the other s concern we also briefly how this inefficiency and free riding in the context of interaction between individuals might be mitigated by compulsory social security systems as another example we interpret the inefficiency in terms of kornai s soft budget constraints within organizations

rice in asia is it becoming an inferior good empirical results using time series and cross sectional data indicate that rice in asia is becoming an inferior good income elasticities declined and in some cases became negative between 1961 and 1985 in most of the fourteen asian countries studied accordingly domestic demand for rice in these countries is not likely to grow as rapidly as it has in the past as a consequence there is a potential for excess supplies of rice to develop in asia putting downward pressure on rice prices while governments in asian countries may need to adjust their rice policies in the future world rice suppliers may need to develop new markets for rice

international charity under asymmetric information abstract international charity is often subject to moral hazard and adverse selection problems we show that the burden of informational asymmetries are borne by the most needy countries even when charities design incentive contracts which limit the rents that some countries can extract

it pays to do good but not to do more good than it pays a note on the survival of altruism abstract recently becker and hirshleifer have attempted to explain the survival of altruism altruism pays in their framework because it permits mutual cooperation or exchange to take place this paper shows that these arguments are invalid this case is that in any environment where altruism pays there is always an egoistic strategy called cooperation egoism which yields an even higher return in equilibrium this will be anticipated so that while altruism may pay off in a disequilibrium situation in equilibrium egoism and not altruism has survival value

global financial services and a global single currency abstract the purpose of this paper is to highlight the evolution of financial institutions in the context of increasingly volatile foreign exchange markets the paper discusses the importance of the formation of a single currency in the us in the 19th century and the formation of the euro in the 20th century for reducing volatility in foreign exchange markets that have assisted financial institutions international business expansion the paper also considers some of the key assumptions of an optimal currency theorem such as labour mobility and argues that in the 21st century more comprehensive financial market integration and a single global currency could emerge provided that capital mobility and hence foreign capital flows continue meeting labour in the host countries for production rather than the other way round

the behaviour of the real exchange rate evidence from regression quantiles abstract we test for mean reversion in real exchange rates using a recently developed unit root test for non normal processes based on quantile autoregression inference in semi parametric and non parametric settings the quantile regression approach allows us to directly capture the impact of different magnitudes of shocks that hit the real exchange rate conditional on its past history and can detect asymmetric dynamic adjustment of the real exchange rate towards its long run equilibrium it therefore provides a detailed mapping of the real exchange rate behaviour while being a robust alternative to previous unit root tests the latter is confirmed by a simulation analysis comparing the power of the alternative tests as concerns the real exchange rate our results suggest that large shocks tend to induce strong mean reverting tendencies in the exchange rate with half lives less than one year in the extreme quantiles mean reversion is faster when large shocks originate at points of large real exchange rate deviations from the long run equilibrium however in the absence of shocks no mean reversion is observed finally we report asymmetries in the dynamic adjustment of the rer

on the trade impact of nominal exchange rate volatility what is the effect of nominal exchange rate variability on trade i argue that the methods conventionally used to answer this perennial question are plagued by a variety of sources of systematic bias i propose a novel approach that simultaneously addresses all of these biases and present new estimates from a broad sample of countries from 1970 to 1997 the estimates indicate that nominal exchange rate variability has no significant impact on trade flows

inflation risk and international asset returns abstract we show that inflation risk is priced in international asset returns we analyze inflation risk in a framework that encompasses the international capital asset pricing model icapm of adler and dumas 1983 in contrast to the extant empirical literature on the icapm we relax the assumption that inflation rates are constant we estimate and test a conditional version of the model for the g5 countries france germany japan the uk and the us over the period 1975 1998 and find evidence of statistically and economically significant prices of inflation risk in addition to priced nominal exchange rate risk our results imply a rejection of the restrictions imposed by the icapm in an extension of our analysis to 2003 we show that even after the termination of nominal exchange rate fluctuations in the euro area in 1999 differences in inflation rates across countries entail non trivial real exchange rate risk premia

a fresh look at the rotten kid theorem and other household mysteries gary becker s rotten kid theorem asserts that if all family members receive gifts of money income from a benevolent household member then even if the household head does not precommit to an incentive plan for family members it will be in the interest of selfish family members to maximize total family income i show by examples that the rotten kid theorem is not true without assuming transferable utility i find a simple condition on utility functions that is necessary and sufficient for there to be the kind of transferable utility needed for a rotten kid theorem while restrictive these conditions still allow one to apply the strong conclusions of the rotten kid theorem in an interesting class of examples

how much intraregional exchange rate variability could a currency union remove the case of asean 3 abstract a multilateral currency union removes intraregional exchange rates but not the union rate the pre union intraregional exchange rate variability is thus latent a two step procedure is developed to measure this the measured variables are used to model inflation and intraregional trade growth of individual union members counterfactual simulations of the union impact are carried out using the resulting models application to asean 3 shows that the intraregional variability mainly consists of short run exchange rate shocks that the variability significantly affects inflation and intraregional trade of major asean 3 members and that a union would reduce inflation and promote trade regionwide

technological progress for sustaining food population balance achievement and challenges the growth in land productivity in rice cultivation has slowed down substantially since the early 1990s due to technological progress reaching its limit in the irrigated ecosystem and nonavailability of suitable technologies for the unfavorable rainfed environments this development raises concern regarding the world s ability to meet the food population balance in the coming decades rice research must deal with a number of difficult problems to meet the challenge raising the yield ceilings of the current available rice varieties protecting the past yield gains in the irrigated ecosystem and using biotechnology tools to develop high yielding varieties for the rainfed systems that are tolerant to drought submergence and problem soils the speed and extent of meeting these challenges depends on the level of resources that can be mobilized to support crop improvement research in the public sector

deviations from purchasing power parity under different exchange rate regimes do they revert and if so how abstract we propose an empirical model for deviations from long run purchasing power parity ppp that simultaneously accounts for three key features i adjustment toward ppp may occur via nominal exchange rates and relative prices at different speeds ii different exchange rate regimes may generate regime shifts in the structural dynamics of ppp deviations iii nonlinear reversion toward ppp in response to shocks this empirical framework encompasses and synthesizes much previous empirical research using over a century of data for the g5 countries we provide evidence that long run ppp holds the relative importance of nominal exchange rates and prices in restoring ppp varies over time and across different exchange rate regimes and reversion to ppp occurs nonlinearly at a speed that is fairly consistent with the nominal rigidities suggested by conventional open economy models

a household hedonic model of rice traits economic values from farmers in west africa abstract new crop varieties often have been promoted in developing countries based upon superior yield vis a vis locally available varieties this research presents a hedonic price model for upland rice by drawing upon the input characteristics and consumer good characteristics model literature model specification tests determine that a combination of production and consumption characteristics best explains the willingness to pay for new upland rice varieties the household model specification determined that five traits explain the willingness to pay for new rice varieties plant cycle length plant height grain colour elongation swelling and tenderness yield was not a significant explanatory variable of the willingness to pay for seed the implications of this model are two fold first varietal development and promotion must include post harvest characteristics in addition to production traits when determining which varieties to promote for official release secondly non yield production characteristics such as plant height and cycle length are significant factors in producer s assessments of the value of a new variety overall this paper provides an alternative explanation for limited adoption of modern upland rice varieties in west africa varietal evaluation programs have focused too narrowly on yield evaluation and have not promoted varieties with superior non yield characteristics than locally available varieties

economic effects of currency unions we develop a new instrumental variable iv approach to estimate the effects of different exchange rate regimes on bilateral outcomes the basic idea is that the characteristics of the exchange rate between two countries are partially related to the independent decisions of these countries to peg explicitly or de facto to a third currency notably that of a main anchor this component of the exchange rate regime can be used as an iv in regressions of bilateral outcomes we apply the methodology to study the economic effects of currency unions the likelihood that two countries independently adopt the currency of the same anchor country is used as an instrument for whether they share a common currency we find that sharing a common currency enhances trade increases price comovements and decreases the comovement of real gross domestic product shocks

efficiency enhancing signalling in the samaritan s dilemma suppose an altruistic person a is willing to transfer resources to a second person b if b comes upon hard times if b anticipates that a will act in this manner b will save too little from both agents point of view this is the samaritan s dilemma this paper shows that the undersaving result is mitigated if we relax the standard assumption of complete information because if a is uncertain about how big b s need for support is b will have an incentive to signal that he is in great need by saving more than he otherwise would have done