bipolarity multipolarity and free trade recent literature typically attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade i argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system security externalities explicit consideration of these effects suggests that a bipolar international political system has an advantage relative to its multipolar counterpart with respect to the opening of markets among states less credible exit threats and stronger incentives to engage in altruism within its alliances explain the advantage of a two power system the real income gains that motivate free trade are also the source of the security externalities that impede it their ability to internalize these effects makes military alliances the natural basis of agreements to open international markets the evolutionary prospects of alliances vary however ones that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts i argue that less credible exit threats and stronger incentives to engage in alliance altruism explain the advantage of a two power system several important limits of the argument should be made clear immediately i argue at the systemic level i attempt to isolate the political and economic incentives for free trade that occur at the level of the international system i do not therefore consider the impact of unitlevel factors on the pursuit of these incentives for example neither the role of special interest groups nor the organization of domestic exchange via hierarchies instead of markets is considered doyle 1986 frieden 1988 ruggie 1982 the conditions i assume are those of standard international trade theory ethier 1983 and illustrative rather than systematic empirical referents are used these restrictions are appropriate given my purpose to demonstrate analytically the advantage of a bipolar international political system with respect to free trade

green by choice cross national variations in firms responses to ems based environmental regimes environmental management systems emss represent a new generation of voluntary beyond compliance environmental policies that neither set substantive goals nor specify final outcomes as a result many stakeholder groups are lukewarm toward them since 1993 two major supranational emss iso 14001 and the european union s environmental management and audit scheme emas have been introduced firms receive formal accreditation after their ems has been certified by outside verifiers this accreditation can potentially bestow monetary and nonmonetary benefits on these firms firm level ems adoption patterns in the united kingdom germany and the united states vary thereby suggesting that national contexts influence firms responses to them in germany and the u k a significant number of sites have become either iso 14001 or emas certified while the take up of iso 14001 in the u s emas is available only to european sites has been less enthusiastic this article begins with the hypothesis that firms in countries with adversarial economies where regulators and business are on less than friendly terms are less likely to adopt ems based programs this hypothesis explains why iso 14001 take up has been relatively high in the u k and relatively low in the u s however it cannot explain 1 the high rate of take up of both iso 14001 and emas in germany where the stringency of environmental legislation has been a contentious issue between the government and industry and 2 why emas has been more popular in germany than in the u k this article argues that the original hypothesis while largely correct is underspecified to better explain the cross national differences in ems adoption one must take into account the type of adversarial economy adversarial legalism versus prescriptive interventionism and the nature of the policy regime procedural versus substantive

explaining the striking similarity in macroeconomic policy responses to the great recession the institutional power of macroeconomic governance this article offers an institutional explanation for the strikingly similar configuration of macroeconomic policy responses of advanced capitalist economies to the great recession in recent decades advanced economies have adopted a common structure of macroeconomic governance which organizes macroeconomic policymaking around monetary policy operated by autonomous central banks and sets limits on politicians policymaking discretion during the great recession this macroeconomic governance allowed central banks to enact unconstrained monetary expansion and governments to enact constrained fiscal expansion the argument here is empirically substantiated by focusing at how macroeconomic policies in response to the great recession have evolved in australia and sweden as well as by looking at parallel developments in the united kingdom and the united states

international economic structures government interests and international coordination of macroeconomic adjustment policies analysts have commonly argued that there has been a decline in international coordination of the kinds of policies that governments can use to manage the international payments imbalances that emerge when different governments pursue different macroeconomic policies the decline typically has been attributed to a posited decline in american hegemony in contrast this article argues that international coordination of macroeconomic adjustment policies trade and capital controls exchange rate policies balance of payments financing and monetary and fiscal policies was at least as extensive for much of the 1980s as it had been in the 1960s there was however a shift away from coordination of balance of payments financing and other policies that have limited direct consequences for domestic economic and political conditions and a concurrent shift toward coordination of monetary and fiscal policies that are critically important for domestic politics and economics this change is best explained as a consequence of changes in the structure of the international economy most important international capital market integration encouraged governments to coordinate monetary and fiscal policies because balance of payments financing and exchange rate coordination alone are insufficient to manage the enormous payments imbalances that emerge when capital is able to flow internationally in search of higher interest rates and appreciating currencies

the contingent governance of teams analysis of institutional complementarity the first purpose of this paper is to design a model of governance structure called the contingent governance which can control the free riding problem in teams in the second best manner the second is to show by a new method of comparative static analysis that the effectiveness of the contingent governance may be enhanced by complementary institutional arrangements of the imperfect labor market and bank centered financial system the paper discusses the implications of such institutional complementarity for the dynamic change of the japanese main bank system and financial system design of transitional economies copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

interpreting comovements in the trade balance and the terms of trade abstract i examine the relation between the trade balance and the terms of trade in a two country dynamic stochastic exchange economy with complete markets along an equilibrium path for this economy the relation is governed by the substitutability between foreign and domestic goods i find in contrast to non stochastic analyses of the harberger laursen metzler effect that a positive association does not require persistent shocks or non constant rates of time preference this contrast highlights the role played by the structure of asset markets complete and otherwise in generating equilibrium comovements

testing for price anomalies in real estate auctions this paper reports on the results of an auction sale of 83 condominium apartment units in new jersey at the auction every unit was hammered down but unknown to the 2 348 registered bidders 40 of the sales fell through prices in the subsequent sale of condominium units in face to face negotiations resulted in identical units selling for 13 less than they fetched at auction and the discount was largest for those units hammered down early in the auction these results are inconsistent with the usual predictions from the theory of common value auctions and suggest that uninformed bidders in this auction may have been the subject of a winner s curse which generated considerable profit for the seller this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from ano this abstract was borrowed from another version of this item

understanding international trade policies an emerging synthesis the international trade problems of the 1980s stimulated an expansion of scholarship on trade policies by economists and political scientists at least four distinct theoretical perspectives weave their way through recent literature that concentrates on the united states emphasizing market conditions policy beliefs and values national political institutions and global structures respectively new studies in each of these traditions advance beyond the work of their predecessors but none of the perspectives has yet proved adequate as a single unifying vehicle nevertheless we can also see clear movement toward a synthesis with single works blending insights from several traditions thus the books under review do not all fall neatly into the familiar exclusive categories of economics or political science the emerging synthesis needs strengthening in several ways including the development of conditioning hypotheses that will reduce remaining apparent confusions

resolving the regulator s dilemma international coordination of banking regulations since the early 1970s bankers have developed a host of new financial instruments and practices these innovations have altered the nature of banking and this in turn has complicated the task of banking regulation national regulations have become largely ineffective in monitoring the safety and soundness of global banks the resulting market changes and the growth of knowledge about the risks facing the international financial system have prompted governments to hold multilateral discussions regarding banking regulation however the task of international regulation has been compromised by the desire of states to attract foreign and domestic investment to the financial sector since states wish to create or maintain competitive banking institutions they have often deregulated in order to provide banks with a cost advantage in the international marketplace this competitive deregulation undermines collaborative efforts under the leadership of the united states and great britain a multilateral agreement on bank capital standards was reached in december 1987 this agreement suggests that the interplay of market factors consensual knowledge and leadership by powerful states can lead to international policy coordination the article describes the multilateral negotiations that led to this banking accord

exchange rate volatility international trade and resource allocation a perspective on recent research abstract recent research on the effects of exchange rate volatility is discussed and directions for future research are explored the need to pay more attention to the effects of diversification and firms characteristic is emphasized it is suggested that while international risk has risen substantially since floating the differential between international and domestic risk may not this could help explain the failure of international trade to fall drastically and suggests that exchange rate volatility has been more a reflection than an independent cause of underlying instability

the political economy of basle ii the costs for poor countries the financial crises of the 1990s triggered many changes to the design of the international financial system we use the formulation of the new basle capital accord for banks b ii to illustrate that while much affected developing countries have had very little influence on this so called new international financial architecture we argue that b ii has been formulated largely to serve the interests of powerful market players with developing countries being left out at the same time we demonstrate that b ii is likely to raise the costs and reduce the supply of external financing for developing countries in particular furthermore and importantly b ii may well increase the pro cyclicality of external financing an unfortunate outcome given that developing countries already face much volatility in terms of capital flows overall while b ii may indeed compensate for a range of weaknesses of basle i the exclusionary policy process and costs which b ii imposes on developing countries require a re think of the way in which crucial elements of financial governance such as the basle capital accords are developed and implemented

the second face of hegemony britain s repeal of the corn laws and the american walker tariff of 1846 one challenge facing hegemonic stability theory is to specify the processes by which hegemonic countries construct and maintain a liberal international economic order earlier studies have focused on direct coercion or ideological manipulation by the hegemon as a principal technique for manipulating the trade policies of other countries this article explores a different face of hegemony specifically we contend that by altering relative prices through the exercise of their international market power hegemonic leaders influence the trade policy preferences of their foreign trading partners we examine this argument in the case of the american walker tariff of 1846 american tariff liberalization was intimately related to britain s repeal of its corn laws in the antebellum united states northern protectionist and southern free trade proclivities were fixed western grain growers held the balance of power by allowing access to its lucrative grain market britain altered the economic and political incentives of western agriculturalists and facilitated the emergence of the free trade coalition essential to the passage of the walker tariff

the new theory of optimum currency areas highbrow opinion is like a hunted hare if you stand long enough it will come back to the place it started from dennis robertson

the cost effectiveness of the u s export enhancement program bonus allocation mechanism the u s export enhancement program is evaluated from the perspective of the cost effectiveness of its bonus allocation mechanism the current mechanism resembles a discriminatory price common value auction however auction theory suggests that a discriminatory auction may not be optimal in this setting for several reasons this article evaluates the current format relative to an alternative uniform price auction estimation results reveal evidence of strategic bidder behavior under the current format and simulations suggest that adopting a uniform price auction format for bonus allocation may yield considerable savings to the treasury by eliminating incentives to pad bids and increasing participation in the auction

financial interdependence and the state international monetary relations at century s end as the twentieth century draws to a close one can find sharply contrasting views among leading scholars on almost every key issue in positive international political economy how strong are international as opposed to domestic influences on policy how important are issues of national security high politics versus economic considerations low politics what role do institutions international and domestic play in influencing and constraining the behavior of governments why is international cooperation rare but not unheard of the list goes on and on

the politics of foreign direct investment into developing countries increasing fdi through international trade agreements the flow of foreign direct investment into developing countries varies greatly across countries and over time the political factors that affect these flows are not well understood focusing on the relationship between trade and investment we argue that international trade agreements gatt wto and preferential trade agreements ptas provide mechanisms for making commitments to foreign investors about the treatment of their assets thus reassuring investors and increasing investment these international commitments are more credible than domestic policy choices because reneging on them is more costly statistical analyses for 122 developing countries from 1970 to 2000 support this argument developing countries that belong to the wto and participate in more ptas experience greater fdi inflows than otherwise controlling for many factors including domestic policy preferences and taking into account possible endogeneity joining international trade agreements allows developing countries to attract more fdi and thus increase economic growth

economic and monetary union in europe the european council s maastricht agreement maps out a precise route to monetary union and the eventual introduction of a common currency my discussion begins with a look at the general arguments for and against monetary union i shall then discuss the proposed constitution of the european central bank and whether it is likely to be conducive to monetary stability together with some of the problems posed by the transition to the new regime finally i will turn to the issue of rules for the conduct of fiscal policy and the question of fiscal federalism

terms of trade uncertainty savings and the production structure abstract this paper studies the response of savings and the production structure tradeables non tradeables to an increase in future terms of trade uncertainty holding expected utility constant there is no international trade in risky assets the impact on the production structure is studied by analyzing the markets for domestic equity the paper shows that the response of both non tradeables production and savings is ambiguous cross country evidence indicates that an increase in terms of trade uncertainty leads to a higher fraction of the labor force in the non tradeables sector

disguised protectionism and linkages to the gatt wto member states of the gatt wto have linked some issue areas outside trade to the institution and did so with varying depths at the same time they have chosen not to link other issue areas what accounts for this variation the author argues that states establish a legalized linkage between the gatt wto and an issue area outside it when they are uncertain about the possibilities of disguised protectionism such uncertainty exists under two conditions when diversity in regulations in an issue area across states generates a large adverse impact on trade negative externalities but that diversity can be justified at the international level for 1 having an independent objective apart from hampering trade and 2 when there are few alternative policies to achieve that objective legitimacy states establish a highly legalized linkage in these situations to reduce the uncertainty and minimize disguised protectionism by contrast when regulatory diversity exhibits low legitimacy states establish only a weakly legalized linkage in the absence of meaningful externalities they do not establish any linkages the author evaluates this argument in two ways he provides an overview of eleven issue areas about which there have been some debates or conflicts about linkages to the gatt wto in addition he carries out in depth case studies of three issue areas labor standards environmental standards and health safety standards the findings of this article contribute to a better understanding of international institutions and cooperation as well as of the evolution of the multilateral trade institution

aggregate spending and the terms of trade is there a laursen metzler effect this paper investigates the spending and current account effects of terms of trade shifts in a model where households maximize utility over an infinite planning period in the framework developed here an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated permanent worsening in its terms of trade the paper s model thus provides a setting in which the current account deficit predicted by laursen and metzier harberger and others fails to materialize

an empirical study of an auction with asymmetric information this paper examines federal auctions for drain age leases on the outer continental shelf from 1959 to 1969 these are leases that are adjacent to tracts on which a deposit has been discovered the authors find that the data strongly support the hypotheses that neighbor firms are better informed about the value of a lease than nonneighbor firms that neighbor firms coordinate their bidding decisions and that both types of firms bid strategically in accordance with the bayesian nash equilibrium model for first price sealed bid auctions with asymmetric information

what moves parties the role of public opinion and global economic conditions in western europe do western european political parties adjust their ideological positions in response to shifts in public opinion and to changing global economic conditions based on a time series cross sectional analysis of parties ideological dynamics in eight western european democracies from 1976 1998 the authors conclude that both factors influence parties ideological positions but that this relationship is mediated by the type of party specifically they find that parties of the center and right react to both public opinion and the global economy whereas parties of the left display no discernible tendency to respond to public opinion and also appear less responsive to global economic conditions the findings on leftist parties distinctiveness support arguments about these parties long term policy orientations as well as about their organizational structures the authors also find little support for neoliberal convergence arguments

international capital mobility amongst the major industrialised countries too little or too much this paper examines capital flows among the major industrialized countries with a view to assessing m feldstein and c horioka s 1980 claim that international capital mobility is limited it argues that saving investment correlation tests are inherently flawed and proposes an alternative methodology for testing the degree of international capital mobility it finds that capital flows have been excessive in the sense that they are driven by speculative forces rather than by economic fundamentals copyright 1995 by royal economic society

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

democratic institutions and exchange rate commitments since the collapse of the bretton woods system countries have been able to choose from a variety of exchange rate arrangements we argue that politicians incentives condition the choice of an exchange rate arrangement these incentives reflect the configuration of domestic political institutions particularly electoral and legislative institutions in systems where the cost of electoral defeat is high and electoral timing is exogenous politicians will be less willing to forgo their discretion over monetary policy with a fixed exchange rate in systems where the costs of electoral defeat are low and electoral timing is endogenous politicians are more likely to adopt a fixed exchange rate regime consequently differences in domestic political systems can help account for variations in the choice of exchange rate arrangements we test this argument using constrained multinomial logit and binomial logit on a sample of twenty democracies over the period 1974 95 domestic political institutions have a significant effect on exchange rate regime choice even after controlling for systemic macroeconomic and other political variables

architecture of equity markets the abidjan regional bourse literature on financial market liberalization focuses heavily on state activity in allocating preferential credit i consider state activity in promoting nascent equity markets by asking why a state would create and promote a market in which the transaction costs are high the potential rate of return is low and firms are reluctant to list shares i examine the case of the west african regional stock exchange and propose that the central bank for the west african monetary union created it to mediate the relationship between this region and the world economy i propose that states and domestic markets act as complements rather than as rivals in some instances of bourse creation moreover bourses in developing economies present a different set of relationships among states public and private lending authorities and market participants than their counterparts in more developed financial environments this illuminates a need for further research in this area

the impact of terms of trade shocks on a small open economy a stochastic analysis abstract the impact of a change in the terms of trade on the economic performance of a small economy is analyzed both the effects of unanticipated shocks and changes in the mean and variance of the probability distributions generating these disturbances are discussed in all cases the key element determining the adjustment is the effect on the rate of growth of real wealth to which in equilibrium all other real quantities are directly tied conditions for the harberger laursen metzler effect to hold are considered the impact of these changes on economic welfare as measured by expected discounted utility of the representative agent is also addressed jel f41 f43

transitory and permanent disturbances and the current account an empirical analysis in the intertemporal framework the intertemporal models of current account determination demonstrate that in the analysis of the current account balance of a country it is important to distinguish between transitory and permanent disturbances in income and relative prices this paper attempts to decompose the observed data on income and real exchange rate into transitory and permanent components and then uses the decomposed series to test the empirical validity of the predictions of the intertemporal models evidence from the united states and japan provide very limited support for the intertemporal models in terms of the effects of transitory and permanent changes in income on current account balance for both us and japan the study finds that permanent changes in real exchange rate have significant effects on the current account balance statistical tests find no evidence of hysteresis in the trading relations of the two countries

increasing returns path dependence and the study of politics it is increasingly common for social scientists to describe political processes as path dependent the concept however is often employed without careful elaboration this article conceptualizes path dependence as a social process grounded in a dynamic of increasing returns reviewing recent literature in economics and suggesting extensions to the world of politics the article demonstrates that increasing returns processes are likely to be prevalent and that good analytical foundations exist for exploring their causes and consequences the investigation of increasing returns can provide a more rigorous framework for developing some of the key claims of recent scholarship in historical institutionalism specific patterns of timing and sequence matter a wide range of social outcomes may be possible large consequences may result from relatively small or contingent events particular courses of action once introduced can be almost impossible to reverse and consequently political development is punctuated by critical moments or junctures that shape the basic contours of social life

capital rules the domestic politics of international regulatory harmonization in the past fifteen years financial regulators from the developed world have attempted to create international regulatory standards in a variety of financial issue areas their negotiations are notable for the stark variation in the preferences of regulators toward international regulatory harmonization certain regulators actively resist any attempts at regulatory harmonization while others are vocal in their advocacy for an international agreement when will regulators seek to harmonize their rules with their foreign counterparts i propose a principal agent framework for analyzing regulator behavior that views international harmonization as a means of satisfying domestic political pressures the framework predicts that regulators are more likely to seek international regulatory harmonization when confidence in the stability of financial institutions is declining and when competitive pressures are increasing from foreign firms facing less stringent regulations i explore the consistency of the framework with two important cases in the history of international financial regulation the negotiations among bank regulators leading up to the 1988 basel accord on bank capital adequacy and the negotiations among securities regulators over capital adequacy for securities firms between 1988 and 1992 i thank gabe aguilera david bach ethan bueno de mesquita dan carpenter bill clark mark copelovitch jeff frieden dan gingerich dan ho devesh kapur joseph n r sanberg ross schaap allan stam matt stephenson two anonymous reviewers and the editors of io for helpful comments discussions and feedback i am also indebted to the thirty current and former regulators and financial industry executives who participated in interviews to advance this project finally i thank the weatherhead center for international affairs and the center for european studies for research funding

setting international standards technological rationality or primacy of power standards have become one of the most important nontariff barriers to trade especially national product standards that specify design or performance characteristics of manufactured goods divergent national standards often inhibit trade whereas regional and international standards increasingly serve as instruments of trade liberalization consequently the setting of international standards seemingly technical and apolitical is rapidly becoming an issue of economic and political salience but who sets international standards who wins who loses this article offers a fresh analytical approach to the study of international standards which the authors call the institutional complementarities approach it builds on insights from realism and the battle of the sexes coordination game but emphasizes complementarities of historically conditioned standardization systems at the national level with the institutional structure of standardization at the international level it posits that after controlling for other factors that influence involvement in international standardization differences in institutional complementarities play a critical though largely accidental role in placing firms from different countries or regions in a first or second mover position when standardization becomes global the authors illustrate the insightfulness of this approach through statistical analyses of the first scientific set of data on standards use and standardization collected by the authors through an international online survey

deterioration of the terms of trade and capital accumulation a reexamination of the laursen metzler effect abstract this paper analyzes the effect of both a permanent and a temporary deterioration in the terms of trade on a small open economy the model based on intertemporal optimization emphasizes the labor leisure choice and the role of capital accumulation the transitional dynamics is shown to depend upon the long run response of the capital stock to the terms of trade shock this consists of a negative substitution effect together with a positive income effect whether or not the laursen metzler effect holds depends upon whether the income effect dominates the substitution effect

the harberger laursen metzler effect under capital market imperfections abstract this paper re examines the effects of a permanent terms of trade change on a dynamic small open economy facing an imperfect world capital market as studied in obstfeld 1982 aggregate spending and the terms of trade is there a laursen metzler effect quarterly journal of economics 97 251 270 which assumes that the economy faces a downward sloping bond curve the novelty of the present paper is that a saddle path stable steady state comes into existence under the assumption that households subjective discount rate is a decreasing function of instantaneous utility the harberger laursen metzler hlm effect is shown to hold unambiguously i e an unanticipated permanent terms of trade deterioration leads to an increase in aggregate expenditure and a current account deficit this result is in stark contrast to those obtained in obstfeld 1982 aggregate spending and the terms of trade is there a laursen metzler effect quarterly journal of economics 97 251 270 and many other studies in the literature

european monetary upheavals the european monetary system was thrown into disarray by the speculative crises from september 1992 to august 1993 the consequent widening of the permitted bands of fluctuation from 2 25 to 15 has added to the uncertainty in the european economic environment and cast doubt on the strategy for monetary unification set out in the maastricht treaty this book provides a response to the new situation from a variety of economic perspectives it includes analyses of the upheavals themselves separate chapters on monetary policy in france germany and the uk and discussions of implications for the future the papers are written by academic contributors from the usa and europe as well as the uk the book also includes a panel discussion in which economists from national and international institutions debate the future of european monetary integration

political cycles and exchange rate based stabilization fixed exchange rates implemented to increase credibility and attract foreign investment or as an alternative approach to stabilization in high inflation economies have been shown to be successful in expanding economic activity and correcting inflation in the short term but often lead to undesirable outcomes in the medium to long term although there is a wealth of literature documenting the boom bust cycles associated with the adoption of a nominal anchor no adequate explanation has been proffered as to governments repeatedly choosing policies that are self defeating the authors address this question with a political economy explanation based on the notion of a self interested government for which short term stabilization is attractive in the face of incentives posed by the electoral cycle if the election coincides with the boom phase of an exchange rate based stabilization incumbent governments increase the likelihood of gaining reelection and the bust phase will develop if at all only after the contest the authors thus suggest a modified version of the traditional political business cycle from the standpoint of a self interested office seeking government exchange rate based stabilizations can make good political sense empirical results based on an analysis of eighteen latin american countries from 1970 to 1999 support the insights of the argument movements towards a more fixed exchange rate are greater than three times more likely in a preelection period than in other stages of the electoral cycle

intertemporal optimizing models of trade and current account balance a survey abstract this study surveys the intertemporal optimizing models of trade and current account balance that were developed calibrated and empirically tested since they came into vogue in the 1980s the implications of these models often differ from those of static and dynamic conventional non optimizing models the literature on optimizing models has not only grown reasonably fast but has also witnessed significant advances in methodology and these models have culminated into a distinct strand of new open economy macroeconomics the studies conducted until the late 1980s have used deterministic perfect foresight models while several studies conducted since the 1990s relax the perfect foresight and certainty equivalence assumptions and develop stochastic dynamic general equilibrium models to account for uncertainty confronting the optimizing agents the future research needs to explore the possibility of tracing any preferred specification of household preferences model the effect of time varying discount factor on household utility function and intertemporal budget constraint examine the role of costs in international trade place a parallel emphasis on the empirical verifications of theoretical propositions examine the relative performance of optimizing vis a vis non optimizing models and rationalize the extreme propositions of perfect and imperfect capital mobility in the wake of moderately open capital accounts

price discrimination in the context of vertical differentiation an application to canadian wheat exports this study examines the ability of the canadian wheat board cwb to price discriminate in bread wheat exports this study models wheat as a vertically differentiated intermediate good and modifies the model of vertical differentiation by mussa and rosen to the realities of wheat import demand the conceptual model isolates the bases of price discrimination and demonstrates that the cwb s ability to exploit cost differences in pricing depends on the extent of the differentiation between canadian and u s wheat this model is implemented using monthly confidential price data provided by the cwb for exports to japan the united kingdom and two markets aggregating remaining exports through canada s west and east coasts for 1982 1994 the data indicate that the cwb charges different prices to different countries for wheat of the same grade and protein content results from the model indicate that the price difference between any two markets is not completely explained by elements of perfect competition however the evidence is mixed regarding the ability of the cwb to utilize all the instruments available to price discriminate thus the cwb s pricing strategy may be more complex and dynamic than the prescription for static producer surplus maximization derived in this study

the political economy of financial internationalization in the developing world in the last decade a growing number of developing countries have opened their financial systems by liberalizing capital flows and the rules governing the international operations of financial intermediaries one explanation of this rush toward greater financial internationalization is that increasing interdependence generates domestic and foreign political pressures for capital account liberalization while we find evidence for that hypothesis we find that the proximate cause in developing countries more frequently is found in balance of payments crises politicians perceive that financial openness in the face of crisis can increase capital inflows by indicating to foreign investors that they will be able to liquidate their investments and by signaling government intentions to maintain fiscal and monetary discipline the argument is explored through case studies of chile indonesia mexico and south korea

how constraining is capital mobility the partisan hypothesis in an open economy a growing literature argues that international financial integration has eliminated the possibility for distinct partisan macroeconomic strategies i test this hypothesis by reformulating the partisan hypothesis in an open economy context and conducting pooled timeseries analysis of budget balances real interest rates and capital controls for fourteen oecd countries between 1970 and 1994 the analysis provides little evidence that financial integration has eliminated distinct partisan macroeconomic policies under fixed exchange rates leftist governments run larger deficits than rightist governments and use capital controls to reduce interest rate premia under floating exchange rates leftist governments pursue looser monetary policies than rightist governments while partisan distinctions do weaken in the 1990s in countries with fixed exchange rates this is attributed to the recession of the early 1990s and to important institutional changes in the european union international financial integration therefore does not prevent governments from pursuing distinct partisan macroeconomic policies

coordination in heterogeneous federal systems abstract we compare centralized and decentralized policy making in a federation in which policy heterogeneity is inherently costly and preferences vary across jurisdictions all jurisdictions agree that some harmonization is desirable but no one agrees on the direction of harmonization this type of collective choice problem arises when members of a federal system have to coordinate nonbudgetary policies such as laws regulations standards or diplomatic policies contrary to the common wisdom decentralization becomes optimal when coordination becomes very important when coordination costs are symmetric decentralization dominates centralization irrespective of the magnitude of externalities and the heterogeneity of preferences in the case of discontinuous network effects standardization never pareto dominates decentralization

phoenix risen the resurrection of global finance of all the many changes of the world economy since world war ii few have been nearly so dramatic as the resurrection of global finance a review of five recent books suggests considerable diversity of opinion concerning both the causes and the consequences of financial globalization leaving much room for further research competing historical interpretations stressing the contrasting roles of market forces and government policies need to be reexamined for dynamic linkages among the variables they identify likewise impacts on state policy at both the macro and micro levels should be explored more systematically to understand not just whether constraints may be imposed on governments but also how and under what conditions and what policymakers can do about them finally questions are also raised about implications for the underlying paradigm conventionally used for the study of international political economy and international relations more generally

international organisations in a world of regional trade agreements lessons from club theory this essay deals with the challenge that international organizations face at the turn of the millennium the basic insight from the theory of clubs and information theory is that coordination and cooperation require dominant providers cooperation becomes more difficult as players become more equal in economic size today s environment is less conducive to cooperation than the environment after world war ii by extension club theory suggests that regional trade agreements are not flukes they have proliferated because cooperation is feasible in smaller groups with a few larger players there is a significant risk however that regional blocs may replace the multilateral cooperative process to reduce this risk we propose the creation of an inter bloc international organization dedicated to reduce blocs barriers to trade and finance

the globalization of liberalization policy diffusion in the international political economy one of the most important developments over the past three decades has been the spread of liberal economic ideas and policies throughout the world these policies have affected the lives of millions of people yet our most sophisticated political economy models do not adequately capture influences on these policy choices evidence suggests that the adoption of liberal economic practices is highly clustered both temporally and spatially we hypothesize that this clustering might be due to processes of policy diffusion we think of diffusion as resulting from one of two broad sets of forces one in which mounting adoptions of a policy alter the benefits of adopting for others and another in which adoptions provide policy relevant information about the benefits of adopting we develop arguments within these broad classes of mechanisms construct appropriate measures of the relevant concepts and test their effects on liberalization and restriction of the current account the capital account and the exchange rate regime our findings suggest that domestic models of foreign economic policy making are insufficient the evidence shows that policy transitions are influenced by international economic competition as well as the policies of a country s sociocultural peers we interpret the latter influence as a form of channeled learning reflecting governments search for appropriate models for economic policy

the european monetary system list of figures list of tables preface 1 introduction niels thygesen part i the international environment 2 the european monetary system the dollar and the yen rudiger dornbusch discussion robert triffin discussion charles wyplosz part ii disinflation external adjustment and cooperation 3 monetary discipline and cooperation in the european monetary system a synthesis jacques melitz discussion jose vinals 4 the role of the exchange rate regime in a disinflation empirical evidence on the european monetary system francesco giavazzi and alberto giovannini discussion william branson 5 inflation and the european monetary system susan m collins discussion jean jacques rey 6 economic growth and exchange rates in the european monetary system their trade effects in a changing external environment stefano vona and lorenzo bini smaghi discussion david begg part iii exchange rates capital mobility and monetary coordination 7 exchange rates interest rates capital controls and the european monetary system assessing the track record michael j artis and mark p taylor discussion emil maria claassen and eric peree 8 the stability and sustainability of the european monetary system with perfect capital markets john driffill discussion daniel gros 9 competitiveness realignment and speculation the role of financial markets maurice obstfeld discussion marcus miller discussion herakles polemarchakis 10 interventions sterilisation and monetary policy in european monetary system countries 1979 87 cristina mastropasqua stefano micossi and roberto rinaldi discussion wolfgang rieke 11 monetary policy coordination within the european monetary system is there a rule massimo russo and giuseppe tullio discussion lucas papademos part iv the future of the european monetary system 12 the european monetary system a long term view tommaso padoa schioppa 13 a new phase in the european monetary system exchange rate constraint capital liberalisation and policy coordination a report of the conference panel discussion lamberto dini peter kenen rainer masera wolfgang rieke luigi spaventa and jacques waitzenegger index

room to move international financial markets and national welfare states a central research question in international political economy concerns the influence of financial markets on government policy outcomes to what extent does international capital mobility limit government policy choices i evaluate the relationship between international financial markets and government policy outcomes with a focus on the government bond market in developed democracies evidence includes interviews with financial market participants and a cross sectional time series analysis of the determinants of interest rates this evaluation suggests that governments of developed democracies face strong but narrowly defined financial market pressures financial market participants are concerned with a few macroeconomic policy indicators including inflation rates and government deficit gdp ratios but not with micropolicy indicators such as the distribution of government spending across functional categories in these areas governments retain policymaking autonomy i conclude by exploring the role of financial market influences within domestic politics and offering suggestions for further research

international investment agreements and services markets locking in market failure summary bilateral investment treaties bits and investment chapters in preferential trade agreements have become popular measures to guarantee investor friendly policies while they reassure multinational firms they also constrain host country authorities in regulating markets to stimulate competition these problems are widespread in service industries characterized by significant economies of scale this paper presents case studies of the difficulties the chilean regulatory authorities faced in regulating the financial services telecom and energy industries it concludes that able regulators are necessary but that international agreements need to also leave enough policy space

public goods and political institutions trade and monetary policy processes in the united states basic analytic premises are an issue in contemporary debates about the u s foreign economic policy process in dispute are the power structures alleged to govern the formation of american trade and international monetary policy thus the literature supports both of these assumptions the distribution of power is skewed towards private actors in the issue area generally the distribution of power varies according to issue area within the camp of issue specific power structures as i shall discuss in more detail support can be found for almost any assumption about the distribution of power prevailing in the language of current debate between state and society

the international politics of harmonization the case of capital market regulation the internationalization and globalization of capital markets greatly complicates the tasks of national financial regulators it is becoming increasingly difficult if not impossible to regulate the activities of banking and securities firms and the broad range of transactions in which they engage on a national level in this article i explore the process of international regulatory harmonization in capital markets focusing especially on the mechanisms political pressure market pressure and institutional arrangements that facilitate this process i argue that the united states and the united kingdom are dominant players in the capital market and that the factors most relevant for understanding harmonization processes are 1 whether other jurisdictions have incentives to emulate the regulatory innovations of the dominant financial centers and 2 whether the dominant centers experience negative externalities in the process these two factors shed considerable light on whether harmonization will be spurred primarily by market forces or by politics they also suggest the likely role of international institutions in the process of regulatory harmonization the argument is illustrated using four issue areas capital adequacy requirements for banks anti money laundering rules accounting standards and information sharing among securities regulators

making rules for global finance transatlantic regulatory cooperation at the turn of the millennium this article explains a shift in the way transatlantic authorities managed conflicts over the cross border regulation of securities markets from cooperation skewed heavily toward the preferences of u s officials and accepted grudgingly by european counterparts to a euro american regulatory condominium characterized by close interactions among decision makers and mutual accommodation in the final decades of the twentieth century the asymmetric influence wielded by u s securities market authorities had few parallels in other regulatory areas why then did u s officials become more accommodating and european authorities more influential and why did the turning point occur in 2002 and 2003 an unlikely moment for intensified transatlantic sovereignty sharing my study shows that institutional change inside the eu recast the north atlantic balance of regulatory leverage and thereby was the primary factor behind the reshaping of transatlantic cooperation internal eu regulatory centralization changed the expectations of u s and european firms and authorities and generated new incentives in washington d c for accommodation and closer transatlantic coordination my explanation differs from models that accepting u s financial pre eminence as a given attribute variance in cross border regulatory cooperation to factors such as incentives derived from the particularities of issue areas or preferences rooted in domestic politics while resonating with a well established theme from the realist branch of ipe my findings have broad theoretical significance and open new avenues for dialogue between realists and constructivists about the social political and institutional foundations of power in global economic affairs the transatlantic political process set off by financial transformation in europe reveals contemporary sources of systemic change and raises questions about what the eu s ascendance as a global financial regulator will mean in the aftermath of the late 2000s crisis

exchange rates and prices an empirical analysis the effects of exchange rates on domestic prices are investigated in the context of a semistructural model of exchange rate determination in which both exchange rates and prices are determined endogenously the author assumes and imposes for the estimation that the exchange rate is cointegrated with its fundamentals the central result of the paper is that exchange rates have relatively small effects on national price levels for the g7 countries the effects are largest for the united kingdom followed by the united states and canada they are strongest when prices are measured by the producer price index copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the domestic politics of banking regulation this article seeks to ground financial regulatory choices in domestic politics based on evidence from twenty two industrialized countries we argue that electoral rules specifically the extent to which they are centrifugal or centripetal have a significant effect on whether the banks or their consumers pay for the security of the banking system moreover despite the homogenizing effects of global financial integration the political dynamics generated by these electoral rules continue to shape the nature and extent of prudential regulations that countries adopt in the place of banking cartels

the terms of trade labour supply and the current account this paper extends svensson and razin s two period analysis of the laursen harberger metzler effect to the important case where labour supply and output are variable a terms of trade shift alters the relationship between the product and the consumption wage and so induces a change in output this extension substantially enriches their analysis a temporary current terms of trade deterioration has an ambiguous effect on the current account but their finding that a future deterioration leads to an improvement in the current account is strengthened the effect of a permanent terms of trade shift in a stationary state depends not only on the rate of time preference but also on the strength of intertemporal substitution effects in the canonical case of a constant rate of time preference the current account deteriorates in response to a permanent terms of trade deterioration if the degree of intertemporal substitution in consumption exceeds that in leisure or equivalently whether the wealth effect on consumption exceeds that on labour supply the model is then extended to an infinite horizon by embedding it in an overlapping generations framework intergenerational linkages through the labour market are now the source of some complex dynamics from an initial position of balance on current account an anticipated temporary terms of trade deterioration leads to a period of steadily increasing surplus a deficit on impact and a further period of declining surpluses a permanent deterioration in the terms of trade leads to a similar period of anticipatory surpluses followed by a period of declining deficits after impact this abstract was borrowed from another version of this item

the end of an era in international financial regulation a postcrisis research agenda the global financial crisis that erupted in the summer of 2007 has made the reform of international prudential financial regulation one of the top priorities of global public policy past scholarship has usefully explained the creation and strengthening of international financial standards with reference to three policy arenas inter state domestic and transnational despite the accomplishments of this specialist literature the recent crisis has revealed a number of limitations in the ways scholars have understood inter state power relations the influence of domestic politics and the significance of transnational actors within international financial regulatory politics taken together developments in each of these three arenas suggest that researchers may also need to be prepared to shift from explaining the strengthening of official international standards to analyzing their weakening in the post crisis world the latter task will require scholars to devote more analytical attention to a wider set of international regulatory outcomes including informal regulatory convergence regulatory fragmentation and especially cooperative regulatory decentralization

traders bidding strategies on european grain export refunds an analysis with affiliated signals gr ce a une specification d une distribution multivariee de l information detenue par les operateurs et dans le cas ou cette distribution presente de faibles correlations sont specifiees les strategies d offre des operateurs lors des adjudications de stocks d intervention de ble tendre europeen il peut etre mis en evidence que les correlations ont des effets opposes sur les strategies d offre suivant les hypotheses retenues pour la valorisation du bien par les acheteurs cette approche structurelle permet d estimer les strategies d offre selon deux methodes econometriques en particulier est estime le modele avec correlation sous l hypothese de valeur commune

coordination versus prisoners dilemma implications for international cooperation and regimes the study of political institutions in general and international cooperation in particular has been beneficially influenced by the prisoners dilemma pd game model but there is a mistaken tendency to treat pd as representing the singular problem of collective action and cooperation by relaxing the assumptions of 2 2 games and developing an alternate model of the coordination game i show how some cooperation problems have very different properties from those found in pd the analytical results of the two games are compared across several important dimensions number of strategies available number of iterations of the game numbers of players and the distribution of power among them the discussion is illustrated with specific problems of international cooperation and the implications of alternative cooperation problems for the formation and performance of international regimes are explored the basic solutions for pd and coordination have divergent ramifications for the institutionalization stability and adaptability of regimes and for the role of hegemony in the international system however the coordination model does not replace the pd model but complements and supplements it as a way to understand the diversity of political institutions these results are widely applicable to areas of politics beyond international relations

addressing the global sustainability challenge the potential and pitfalls of private governance from the perspective of human capabilities contemporary global politics is characterized by an increasing trend toward experimental forms of governance with an emphasis on private governance a plurality of private standards codes of conduct and quality assurance schemes currently developed particularly though not exclusively by tncs replace traditional intergovernmental regimes in addressing profound global environmental and socio economic challenges ranging from forest deforestation fisheries depletion climate change to labor and human rights concerns while this trend has produced a heated debate in science and politics surprisingly little attention has been paid on the effects of private governance on questions of distribution and justice this is highly problematic at the beginning of the twenty first century global inequalities are greater than ever before while rapid economic social political and environmental changes threaten to further derail sustainable development and humanitarian objectives if private governance creates or intensifies some of the pressing global inequalities e g food security and alleviates others e g environmental degradation from a business ethics perspective we need to know which aspects need to be strengthened and where appropriate interventions are necessary and desirable this paper proposes a framework to examine and classify the distributive outcomes of private governance institutions through the lenses of one particular approach to distributive justice the capability approach empirically it focuses on agrifood one area where the controversy regarding the distributive concerns of private governance are particularly pronounced

capital mobility and the origins of stock markets i illustrate the accepted though hardly researched idea that political institutions play a role in locking in factor specificity across sectors space and borders i use the emergence of modern capital markets in the nineteenth century a process that threatened to redeploy financial resources away from land and traditional sectors to heavy industry as a test case to ascertain the degree of domestic financial capital mobility in nine advanced industrialized countries the main finding is that cross national variations in financial capital mobility holding constant the level of economic development reflect the degree of state centralization

the new politics of interdependence cross national layering in trans atlantic regulatory disputes how are regulatory disputes between the major powers resolved existing literature generally characterizes such regulatory disagreements as system clash in which national systems of regulation com

discriminatory versus uniform treasury auctions evidence from when issued transactions abstract we use when issued transactions data to assess the treasury s current experiment with uniform auctions when issued volume is higher under uniform as compared to discriminatory auctions suggesting a higher information release which should reduce pre auction uncertainty and the winner s curse under uniform auctions when issued volatility falls after the auction and again after the outcome announcement the pattern is the opposite for discriminatory auctions this is further evidence that uniform auctions increase pre auction information and lower the short squeeze a direct comparison of markups in uniform and discriminatory auctions yields mixed results

grappling with globalisation challenges for economic governance this paper examines the key domestic institutional challenges posed by globalisation in terms of the following questions how does economic globalisation differ from other types of economic integration what is its impact on the extant national institutions of economic governance what institutional innovations are required to cope with the challenges and how can institutional change be made politically feasible it identifies three perspectives on how national governments may respond retreat hold fort or rearticulate it concludes that though governments need to devise policies to attract mnes indulging in races to the bottom is not the only route perhaps not even a desirable route second to attract fdi governments must afford labor flexibility how they actually implement it will vary within and across countries depending on the capacities and the willingness of governments to undertake institutional reform labour flexibility can be made politically feasible by increasing the levels of social insurance to protect displaced labour and by instituting programmes that increase their skills and employability

the export enhancement program prospects under the food agriculture conservation and trade act of 1990 abstract according to provisions of the 1990 us farm bill the export enhancement program eep will continue to be an important instrument in promoting us agricultural exports and in challenging subsidizing competitors like the european community ec with funding levels set at a minimum of 500 million annually through 1995 this research whose purpose is to evaluate the likely effectiveness of the wheat eep through 1995 concludes that the eep will have a significant effect on us wheat exports but will be subject to diminishing returns at levels higher than the annual minima and the ec will be only marginally affected by the eep as it can effectively counter the provisions of the eep at low cost

political responses to interdependence what s left for the left heightened economic interdependence in recent years is commonly argued to have generated great pressures for convergence in economic policies across the advanced industrial democracies interdependence has clearly had a great impact on the types of economic policies that governments can pursue they have been unable to pursue independent fiscal and monetary policies since the mid 1970s furthermore all governments have been forced to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets there are however different policies consistent with these goals statistical analyses of economic policies since the mid 1970s show that governments of the left and the right continue to be able to enact distinctive supply side policies that promote competitiveness and flexible adjustment and simultaneously further their partisan objectives

competitiveness through disinflation an assessment of the french macroeconomic strategy france olivier jean blanchard and pierre alain muet over most of the last decade france has followed increasingly rigorous policies the hard franc approach has meant that external competitiveness is no longer sought through devaluation instead the new policy is to achieve a lower inflation rate than abroad in principle the competitiveness through disinflation approach should work and eventually bring down the unemployment rate which has remained broadly unchanged at a high level for many years while maintaining external balance this article investigates whether the policy is working inflation is lower than in germany profits have steadily increased and trade balance has been reestablished but unemployment is higher than in 1983 the policy has been more successful at bringing down inflation than at returning the economy to lower unemployment the adjustment process has been protracted credibility effects have not been fulfilled but nor however have fears that the drastic change of policy might prove unusually disruptive it simply turns out that the policy is working very slowly it would take an improbable 30 accumulated competitiveness gain to bring unemployment down by 3 which does not seem acceptable to france s trading partners

redistributive cooperation market failure wealth transfers and the basle accord indecember1987 policymakersbelongingtothegroupoften g 10 signeda far reaching agreement on international nancial regulation the basle accord ontheinternational convergence of capital measuresand capital standards underthetermsof thisagreement g 10 policymakersimplemented uniform risk based capitalrequirements on commercial banks the origins of the basle accord according tokapstein lay in the consequencesof international nancial integration international nancial integration by raising systemic risk and eroding regulators capacity toensure the soundness of national banking systems generated a market failure evi denced by thedebt crisis commercial bankshad accepted ariskier portfolioofloansthan society considered optimal and were now unwilling to bear the full costs of thislending behavior financial market failurecreated a demand for international regula tiontowhichpolicymakersrespondedby supplying thebasleaccord to theextentthat the payments system had the characterof apublic good it wasreasonable to askevery state to contribute to its maintenance bank supervisors responded to theneed for greater oversight by negotiating the basleaccord

the origins of financial openness a study of current and capital account liberalization theory we assess the determinants of the national regulation of international finance or the comparative degree of national financial openness or closure hypotheses partisanship interacts with a nation s factor endowments to account in part for different international financial policies by governments of the same partisan hue methods we offer a quantitative measure of international financial openness or current and capital account regulation for 21 member countries of the organization for economic cooperation and development for 1950 88 we use regression analysis employing panel corrected standard errors to discover the determinants of financial openness results our main finding is that political partisanship substantially explains openness but does so in complex ways differences in both political institutional arrangements and types of political economy also account for part of the differences in international financial regulation

terms of trade factor intensities and the current account in a life cycle model this paper examines the effects of terms of trade changes on the external adjustment of a small open economy where each consumer has a life cycle saving function the supply side of the economy is given by the standard two sector model with two primary factors labour and capital it is shown that when both commodities are produced a terms of trade deterioration leads to a current account deficit surplus if the export import sector is more labour intensive

global communications and national power life on the pareto frontier regime analysis has focused on issues of market failure the resolution of which depends upon knowledge and institution building global communications regimes however have been concerned either with issues of pure coordination or with coordination problems with distributional consequences outcomes have been decided by the underlying distribution of national power in those areas where power was asymmetrically distributed and there was no agreement on basic principles and norms radio broadcasting and remote sensing no regime was formed in those areas where distributional issues could not be unilaterally resolved allocation of the radio spectrum and telecommunications regimes were created although both principles and rules changed with alterations in national power capabilities

the effects of information voids on capital flows in emerging markets information voids reflect a lack of publicly available information about a country s investment climate and represent the information problems associated with institutional voids we argue that foreign investors differ in their sensitivity to information voids based on their own private information and their flexibility in responding rapidly to change we predict that foreign banks will be least hampered by information voids due to their privileged access to private information about local conditions and ability to adapt quickly to new information portfolio investors while impeded by information voids due to their severely limited access to local private information are able to quickly respond to new information foreign direct investors have moderate access to local private information yet their inability to adapt quickly creates problems dealing with information voids using time series cross sectional data on local public information and capital flows to the thirty largest emerging markets from 1994 to 2012 we find preliminary support for our hypotheses regarding the sensitivity of different investors to information voids we find that direct investors are most sensitive to information voids and banks are least sensitive while portfolio investors are moderately sensitive

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination

competing commitments technocracy and democracy in the design of monetary institutions in this article i refine and expand the agenda for research on monetary institutions first i evaluate the analyses and research designs presented in this special issue of international organization out of this evaluation several ideas about how to produce a third generation of research on this topic emerge specific ideas include how to create a better synthesis with certain branches of economics such as information economics broaden the welfare criteria on which institutional choices are made deepen the analyses of coalitional and other political processes on which the choice of institutions are based and strengthen the tests that are offered in support of these choices in the second part of this article i explore questions of how popular sovereignty over economic policy and institutional choice are achieved i show that the institutional regimes proposed in the special issue are in a sense democratic as long as the public s perceived consensus about economic policies and macroeconomic outcomes is real however if as new work suggests there is genuine dissensus about policy and macroeconomic objectives it is no longer clear that the regimes proposed in the special issue are democratic in the conclusion i briefly discuss a possible crisis of imagination in institutional design