estimating the impact of currency unions on trade solving the glick and rose puzzle does leaving a currency union reduce international trade this paper uses a historical approach to re examine the puzzling large apparent impact of currency unions on trade i find that the early time series estimates were driven by the gradual decaying of colonial trade ties and other major geopolitical factors including warfare communist takeovers and ethnic cleansing episodes my methodology which carries lessons for other uses of gravity equations in policy analysis yields point estimates of currency unions on trade that are not statistically distinct from zero

to float or to fix evidence on the impact of exchange rate regimes on growth we study the relationship between exchange rate regimes and economic growth for a sample of 183 countries over the post bretton woods period using a new de facto classification of regimes based on the actual behavior of the relevant macroeconomic variables in contrast with previous studies we find that for developing countries less flexible exchange rate regimes are associated with slower growth as well as with greater output volatility for industrial countries regimes do not appear to have any significant impact on growth the results are robust to endogeneity corrections and a number of alternative specifications borrowed from the growth literature

the uk regional distribution of foreign direct investment analysis and determinants hill s and munday m 1992 the uk regional distribution of foreign direct investment analysis and determinants reg studies 26 535 544 this paper analyses the regional distribution of foreign direct investment fdi within the uk following an examination of those regions that have been successful in winning new inward investment the paper goes on to consider hypotheses that can be used to explain relative regional success in attracting new fdi projects and jobs empirical testing of these hypotheses suggests that both financial incentives and access to markets are important determinants of the regional distribution of new fdi projects and jobs hill c et munday m 1992 la distribution regionale de l investissement direct etranger au royaume uni analyse et determinants reg studies 26 535 544 cet article cherche a analyser la distribution regionale de l investissement direct etranger au sein du royaume uni suite a une examination des regions qui ont reussi a attirer de nouvel investissement

exchange rate pass through and the welfare effects of the euro this article explores the implications of the european single currency within a simple sticky price intertemporal model we focus on the question of how the euro may change the sensitivity of consumer prices in europe to exchangerate changes our central conjecture is that the acceptance of the euro will lead european prices to become more insulated from exchange rate volatility we find that this affects both the volatility and levels of macroeconomic aggregates in both the u s and europe we find that european welfare is enhanced and the u s shares in europe s good fortune

linking agricultural policies with obesity and noncommunicable diseases a new perspective for a globalising world abstract in light of the shift in policy paradigm in agriculture from state intervention to market liberalisation and globalisation this paper develops a series of hypotheses on the relationship between agricultural policies and consumer diets the first hypothesis is that the paradigm shift has led to greater specialisation of production so changing the ability and incentive for producers to supply certain foods relative to others second the shift has affected farmgate prices both up and down so creating opportunities for the industries which purchase farm commodities the food consuming industries fcis to substitute lower priced ingredients thereby influencing the nutritional quality and content of foods available in the marketplace third it has increased the ability of the fcis to add value through product innovation and marketing creating a market characterised by highly differentiated products targeted to individualised preferences thus increasing the acceptability of a wider variety and quantity of food products the changing agricultural policy paradigm has therefore altered the environment in which consumers make their food choices in the form of food availability affordability and acceptability nevertheless the paper finds no clear pattern when it comes to health the changes have affected both unhealthy and healthy foods and ingredients the key process of importance for health then is not whether the ingredients produced by agriculture are healthy or not but how they are substituted transformed distributed and marketed through the supply chain e g vegetable oils into transfats this leads to an important implication that policies to intervene directly in agricultural production to promote healthy eating are unlikely to be effective or efficient if they do not take into account how foods are processed distributed and marketed through the supply chain in practice this means that the potential for policy interventions in agriculture to improve diets is limited but nevertheless potentially important where it exists given the upstream nature of the change incentives could be created for the fcis to substitute healthier ingredients in their products and or to sell more of them in instances where these changes can be passed all the way to the consumer greater investment could also be made in fruit and vegetable production for local markets along with testing the hypotheses established in this paper the research priority should to identify the incentives that influence the products produced by the fcis with the objective of finding those most amenable to leveraging the supply chain towards healthier eating

bilateral trade and the eurozone evidence from new member countries the question of whether and how much currency unions increase bilateral trade among their members has garnered much attention since rose s seminal article the answer is as pertinent now as ever for both the eurozone s existing and future members as the financial crisis shook the very foundations of the european monetary union emu and brought its shortcomings into the spotlight this paper analyses the issue using the gravity equation with country pair and time fixed effects for a sample of the four new members of the emu slovakia slovenia malta and cyprus which has to the author s knowledge not been studied thus far due to their recent joining and controls drawn from the european union this paper finds a positive relationship between joining the emu and trade with emu partners but not with non emu partners

the impact of foreign direct investment on uk manufacturing is there a profit squeeze in domestic firms this paper examines the extent to which foreign direct investment fdi in selected uk manufacturing sectors has an impact on reported profits in domestic firms foreign manufacturing firms are characterized by relatively high labour productivity and low wage shares entry by foreign firms not only impacts on domestic market shares but also on domestic cost conditions as a result profitability in the indigenous sector may be reduced there are a number of policy implications of this analysis which are explored

financial integration gdp correlation and the endogeneity of optimum currency areas the paper analyses the relationship between trade financial integration and business cycle synchronization in the euro area the introduction of the euro has had a noticeable impact on european financial markets evidence that capital market integration exerts a positive effect on output correlation has two major implications first it corroborates the hypothesis of the endogeneity of optimum currency areas whereby after joining a monetary union countries better meet standard oca criteria second it provides european policy makers with yet another reason to pursue financial integration in the euro area and in prospective members as well

the theory of taxation for developing countries tax policy has far reaching implications for economic development and public administration this book which presents a modern theory of public finance brings together many of the most distinguished economists who have written on the subject they provide coherent principles for tax design and a systematic framework for the analysis of practical questions of tax reform and pricing policy in developing countries the book is especially timely as countries experience increasing shortages of government revenue and the distortions brought about by poorly designed tax systems it pays particular attention to the special problems of developing countries such as the taxation of agriculture the aim throughout is to develop techniques that can be quantitatively applied given the data available and empirical case studies illustrate the methods in action the authors analyze the links between tax theory social cost benefit analysis and the pricing of publicly supplied goods and services they also explore the empirical and econometric problems of identifying the tradeoffs between equity and efficiency other topics treated include the analysis of labor markets the taxation of foreign private investment and of fuel and the pricing of education although the models used concentrate on developing countries most of the methods and discussion apply as well to the problems of more affluent countries

games of monetary and fiscal interactions in the emu abstract this paper constructs various models of the emu and ecb when member countries have different objectives voting in pursuit of national interest can yield moderate and stable inflation the metaphor of walsh type contracts implements a monetary policy rule that averages the member countries most preferred rules in a repeated relationship where a country suffering a large adverse shock can use political bargaining to subvert the ecb s commitment the optimal rule should incorporate some flexibility to forestall that finally freedom of national fiscal policies undermines the ecb s monetary commitment this may justify fiscal constraints like the stability and growth pact

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

foreign direct investment in the uk regions recent trends and policy issues 1994 foreign direct investment in the uk regions recent trends and policy issues regional studies vol 28 no 8 pp 843 848

endogenous oca analysis and the early euro experience some have argued that the endogenous responses to the formation of a currency area are so strong that one need not worry about optimum currency area conditions ex ante we argue that this is much too strong a conclusion we draw on a number of recent studies to evaluate the endogeneity experiences of the eurozone in three major areas trade flows business cycle synchronisation and structural reforms to improve labour and product market flexibility simple before and after comparisons are insufficient for analysis of endogeneity the experiences of non euro western european economies suggest that broader trends also had considerable influence on trade and business cycle patterns while trade rose substantially within the eurozone it also rose with and among other european economies we argue that political economy considerations tend to dampen the magnitude of endogeneity efforts on structural reforms and that meeting conditions for entry may be a more powerful mechanism in this than are subsequent endogenous responses we also discuss a number of areas for further research

low inflation pass through and the pricing power of firms abstract recently there has been a significant decline in the degree to which firms pass through changes in costs to prices a decline that is frequently characterized as a reduction in the pricing power of firms the decline appears to be associated with the decline in inflation in many countries the decline has important implications for monetary policy because it affects both forecasts of inflation and the effects of changes in monetary policy on inflation some have argued that the decline in pricing power helped to keep inflation low in the face of apparently strong demand pressures in the united states in the late 1990s this paper puts forth the view that the decline in pass through or pricing power is due to the low inflation environment that has recently been achieved in many countries first a microeconomic model of price setting is used to show that lower pass through is caused by lower perceived persistence of cost changes evidence is then presented showing that inflation is positively correlated with persistence of inflation suggesting that the low inflation itself has caused the low pass through an economy wide model consistent with the micromodel is then presented to illustrate how such changes in pricing power affect output and inflation dynamics in favorable ways but can disappear quickly if monetary policy and expectations change

workers of the world unite franchise extensions and the threat of revolution in europe 1820 1938 abstract we test the hypothesis that the extension of the voting franchise in europe was related to the threat of revolution we contend that international diffusion of regime contention and information about revolutionary events happening in neighboring countries generate the necessary variation in the perceived threat of revolution using two samples of european countries covering the period from 1820 to 1938 we find robust evidence which is consistent with the threat of revolution hypothesis we also find some evidence that war triggered suffrage reform

trade creation and diversion revisited accounting for model uncertainty and natural trading partner effects summary the effect of preferential trade agreements ptas on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical pta literature the existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the correct set of explanatory variables that ought to be included in the analysis to account for the model uncertainty that surrounds the validity of the competing pta theories we introduce bayesian model averaging bma to the pta literature statistical theory shows that bma successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error and by generating predictive distributions with optimal predictive performance once model uncertainty is addressed as part of the empirical strategy we find strong evidence of trade creation trade diversion and open bloc effects our results are robust to a range of alternative empirical specifications proposed by the recent pta literature copyright 2010 john wiley sons ltd

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

inward investment in the uk and the single european market the impact of completing the single european market sem on the economies ofthe member states is predicted as a combination of economies of scale and greater competition cecchini1 988 in spatial terms this implies a reallocation of resources to exploit the comparative advantage of different regions and countries for the problem regions especially those on the periphery of europe the integration process could lead to a variety of adverse sectoral and regional consequences the effect of greater competition for example may reduce indigenous sectoral strengths and diversity and increase external control the emergence or strengthening of agglomeration tendencies in core regions may lead to a growing centralization of investment and decision making

the determinants of inward investment a welsh analysis inward foreign direct investment is becoming increasingly important to the uk economy and the regions this paper examines the motivation behind inward investment into the uk generally before considering the success of wales in attracting relatively high levels of new inward investment during the eighties the paper then examines key factors which influence foreign direct investment into wales and the associated policy implications

does monetary integration reduce exchange rate pass through there are several theoretical arguments for why the adoption of a common currency either a currency union or a currency board may reduce the exchange rate pass through erpt to domestic consumer prices this paper examines a broad panel of 101 countries over the period 1976 2006 using two stage instrumental variable estimation techniques in order to resolve the potential endogeneity problem the main result is that erpt indeed tends to decline in countries participating in a common currency arrangement in particular there has been a strong reduction in pass through in the member countries of the european monetary union emu since the launch of the euro currency boards do not appear to be different from currency unions both reduce the pass through from depreciation to inflation furthermore the negative impact of common currencies on erpt is at work in both high income and low income countries finally most of the reduction in pass through to consumer prices under common currency arrangements happens somewhere along the pricing chain between the border and the supermarket shelf

long run growth and volatility which source really matters the aim of the article is to analyse the relationship between long run growth and business cycle volatility in particular the main purpose of this article is to identify which source of volatility is most detrimental to growth using cross country data from 1970 to 2000 and several indicators of volatility such as inflation exchange rate government expenditure output and investment volatility this article shows that although all these measures of volatility are remarkably harmful for growth business cycle investment volatility is the main source that hampers long run growth this relation is robust to different measures of business cycle and to different sub samples of countries

an analysis of the factors determining the geographical distribution of japanese manufacturing investment in the uk 1984 91 the purpose of this paper is to discover which factors have been important in determining the geographical distribution of japanese manufacturing establishments in the uk during 1984 91 a multivariate statistical analysis is undertaken based on the poisson model to investigate the inter county variation in the number of establishments locating in each uk county during two separate time periods 1984 88 and 1989 91 in addition to examining the influence of variables such as labour costs labour availability and industry mix on the locational choice of japanese firms the statistical analysis attempts to capture the influence of regional policy multivariate regression analysis reveals that the geographical distribution of japanese owned investment in the uk is only statistically associated with a small number of variables the main explanatory variable in the model is whether an area had assisted area status other key explanatory variables are those reflecting an area s industry mix

distance language religion and the law of one price evidence from canada and nigeria we examine the impact of physical distance language and religion on law of one price lop deviations across interwar canadian and modern nigerian cities the data comprise monthly average retail prices for narrowly defined goods collected by national statistical agencies we find that differences in the fraction of the city population sharing a common language and religion have a significant impact on lop deviations the impact of language differences is consistent with a recently developed theory in which both trade costs and differences in signal noise ratios contribute to lop deviations

exchange rate regimes and international trade evidence from the classical gold standard era in this paper we show that the spread of the classical gold standard in the late nineteenth century increased international trade flows this positive effect was compounded whenever a group of countries formed a monetary union applying the gravity model of trade to more than 1 100 country pairs during the 1870 1910 period we find that two countries on gold would trade 60 percent more with each other than with countries on a different monetary standard moreover a monetary union would more than double bilateral trade flows our findings are relevant for current discussions on alternative monetary arrangements for the twenty first century

the nonlinear impact of currency unions on bilateral trade abstract most gravity model specifications assume that a currency union varies the level of bilateral trade between members by a constant proportion we demonstrate that a common currency also alters the slope of the relationship between bilateral trade and member country gdps

if agricultural land taxation is so efficient why is it so rarely used the land tax enjoys a distinguished pedigree in the theoretical literature on tax efficiency yet it is rarely used as a serious revenue source in rural areas of developing countries this article considers three drawbacks of the land tax relative to taxes on exports or marketed output 1 capitalization effects of the land tax impose a large burden on the current generation 2 land taxation increases the riskiness of net farmer income and 3 administration of the land tax entails costly informational requirements this article demonstrates that only the second and third drawbacks are valid economic arguments against the land tax simulations based on an economic model of farm behavior suggest that farmers may still prefer a land tax to an export tax despite the increased uncertainty of their after tax income administrative costs are therefore the best explanation of the weak link between the theoretical and practical aspects of land taxation

the location of early overseas multinationals in britain 1900 1939 patterns and determinants scott p 1998 the location of early overseas multinationals in britain 1900 1939 patterns and determinants reg studies 32 489 501 this paper examines the location patterns of early overseas multinationals in britain over the period 1900 1939 together with the factors influencing their location the london conurbation is shown to have attracted the majority of early multinationals with significant long term consequences for british regional development the key attractions of london were its strong market links industrial estate facilities and particularly road transport infrastructure cheaper labour in britain s provincial regions did not generally prove a significant attraction to foreign firms due to their heavy reliance on female and juvenile labour and the ample supply of such labour in greater london scott p 1998 la localisation des premieres multinationales etrangeres situees en grande bretagne de 1900 a 1939 distributions et determinants reg studies 32 489 501 cet article che

trade costs 1870 2000 what has driven trade booms and trade busts in the past century and a half was it changes in global output or in the costs of international trade to address this question we derive a micro founded measure of aggregate bilateral trade costs based on a standard model of trade in differentiated goods these trade costs gauge the difference between observed bilateral trade and frictionless trade in terms of an implied markup on retail prices of foreign goods thus we are able to estimate the combined magnitude of tariffs transportation costs and all other macroeconomic frictions that impede interna tional trade but that are inherently difficult to observe we use this measure to examine the growth of global trade between 1870 and 1913 its retreat from 1921 to 1939 and its subsequent rise from 1950 to 2000 we find that trade cost declines explain roughly 55 percent of the pre world war i trade boom and 33 percent of the post world war ii trade boom while a precipi tous rise in trade costs explains the entire inter

currency boards more than a quick fix currency boards more than a quick fix once a popular colonial monetary arrangement currency boards fell into disuse as countries gained political independence but recently currency boards have made a remarkable come back this essay takes a critical look at their performance are currency boards really a panacea for achieving low inflation and high growth or do they merely provide a quick fix allowing authorities to neglect fundamental reforms and thus fail to yield lasting benefits we have three major findings first the historical track record of currency boards is sterling with few instances of speculative attacks and virtually no involuntary exits countries that did exit from currency boards did so mainly for political rather than economic reasons and such exits were usually uneventful second modern currency boards have often been instituted to gain credibility following a period of high or hyperinflation and in this regard have been remarkably successful countries with currency boards experienced lower inflation and higher if more volatile gdp growth compared to both floating regimes and simple pegs the inflation difference reflects both a lower growth rate of money supply a discipline effect and a faster growth of money demand a credibility effect the gdp growth effect is significant but may simply reflect a rebound from depressed levels third case studies reveal the successful introduction of a currency board to be far from trivial requiring lengthy legal and institutional changes as well as a broad economic and social consensus for the implied commitment moreover there are thorny issues as yet untested regarding possible exits from a currency board thus currency boards do not provide easy solutions but if introduced in the right circumstances with some built in flexibility they can be an important tool for gaining credibility and achieving macroeconomic stabilization atish r ghosh anne marie and holger c wolf

land taxes output taxes and sharecropping was henry george right economists have generally argued that if a land tax is administratively feasible then to increase efficiency it should be used to the exclusion of output taxes this article shows that underlying this policy prescription is the assumption that institutions for pooling and spreading production risks are perfect when account is taken of the imperfections in those institutions some use of output taxes will be pareto superior to a pure land tax regime and may induce higher output as well henry george was wrong these results generally apply even when the land tax is indexed to regional output and when land is farmed under sharecropping even in these cases a move from a pure land tax to a mix of land and low output taxes will reduce pre existing distortions in both consumption and production arising from the imperfection in risk markets

agricultural taxation in developing countries a survey of issues and policy this study surveys the experience of agricultural taxation in developing countries in the context of the ongoing policy debate about the tax structure and administration affecting agricultural producers using the examples of a number of countries it analyzes the conceptual and practical problems associated with different tax regimes governments in most countries have reduced indirect export taxes on agricultural producers however the revenue from direct taxes on farmers has not increased a major problem in most countries has been the measurement of actual agricultural income different measures for presumed income have been used with varying success they seem to have the most potential for increased revenue in many countries but their effective implementation is constrained by the political and administrative considerations

disaggregated trade and disaggregated currency unions a ranking of common currency effects andrew rose has long argued that a common currency has a large effect on increasing trade recently rose has called into question the reliability of this conclusion as new techniques have emerged for estimating gravity equations this article uses the sector specific gravity model developed by anderson and yotov 2010a to investigate if disaggregated trade can provide a reliable estimate of a common currency s effect disaggregating trade alone is insufficient to obtain a reliable estimate of a currency union regardless of econometric technique when the effect of a common currency on trade is uniform across all unions disaggregating the universe of currency unions with individual effects provides a reliable ranking of currency unions independent of estimation method by the effect that each union s currency has on increasing trade these rankings differ across sectors

out in the cold iceland s trade performance outside the european union and european monetary union although entering currency and customs unions involve both costs and benefits an increasing body of research is finding that the benefits in terms of international trade creation are remarkably large focusing simply on the european monetary union emu rather than the broad range of currency unions studied by other authors we find that the trade impact of emu is smaller but still substantial our findings suggest that the iceland s trade could increase by about 60 and that the trade to gdp ratio could rise by 12 percentage points should iceland join the european union and emu copyright 2006 oxford university press