a faith based initiative meets the evidence does a flexible exchange rate regime really facilitate current account adjustment it is often asserted that a flexible exchange rate regime would facilitate current account adjustment using data on over 170 countries over the 1971 2005 period we examine this assertion systematically we find no strong robust or monotonic relationship between exchange rate regime flexibility and the rate of current account reversion even after accounting for the degree of economic development and trade and capital account openness this finding presents a challenge to the friedman 1953 hypothesis and a popular policy recommendation by international financial institutions

inefficient credit booms this paper studies the welfare properties of competitive equilibria in an economy with financial frictions hit by aggregate shocks in particular it shows that competitive financial contracts can result in excessive borrowing ex ante and excessive volatility ex post even though from a first best perspective the equilibrium always displays under borrowing from a second best point of view excessive borrowing can arise the inefficiency is due to the combination of limited commitment in financial contracts and the fact that asset prices are determined in a spot market this generates a pecuniary externality that is not internalized in private contracts the model provides a framework to evaluate preventive policies which can be used during a credit boom to reduce the expected costs of a financial crisis copyright 2008 wiley blackwell

the quality effect does financial liberalization improve the allocation of capital abstract we document evidence of a quality effect of financial liberalization on allocative efficiency as measured by dispersion in tobin s q across firms we predict that financial liberalization by equalizing access to credit is associated with reduced variation in expected marginal returns we test this prediction using a new financial liberalization index and firm level data for five emerging markets india jordan korea malaysia and thailand we find robust evidence that financial liberalization rather than financial deepening is associated with improved allocative efficiency

household saving in ldcs credit markets insurance and welfare some ways in which farmers in ldcs can protect their living standards against fluctuations in income are discussed after considering the theory of consumption under uncertainty when there is no or limited borrowing the case where some borrowing is allowed is also examined empirical evidence from some ldcs is used to look at i household borrowing and lending their importance and timing and their role in smoothing consumption and ii the life cycle behavior of consumption and income the results suggest that hump lifecycle saving is not likely to be a very important generator of wealth in ldcs and provide further evidence on the limited role of credit markets

financial factors in economic development financial factors have been assigned strategic importance in economic development but very different factors have been isolated in the respective experiences in asia unrepressed financial markets in mobilizing saving and allocating investment have been given prominence in latin america the central question is the role of inflationary finance the scope for deficits to enhance growth and increasingly the feedback from high and unstable inflation to poor economic performance this paper reviews and contrasts the two approaches and concludes that the strong claims for the benefits of financial liberalization are not supported by evidence financial factors are important but probably only when financial instability becomes a dominant force the scope for inflationary finance is small and the risks are larger than commonly accepted when hyperinflation takes over and foreign exchange crises disrupt the price system and shorten the economic horizon to a week or a month normal economic development is suspended moreover difficult to reverse capital flight puts savings outside the home economy attention should focus on these extreme cases and explore deeper the thresholds at which financial factors become dominant and the channels through which this occurs superior growth performance in this perspective may be more a reflection of adaptability than financial deepening this abstract was borrowed from another version of this item

the great appreciation the great depreciation and the purchasing power parity hypothesis abstract although there has been much recent work on purchasing power parity ppp neither univariate nor panel methods have produced strong rejections of unit roots in us dollar real exchange rates for industrialized countries during the post 1973 period we investigate the hypothesis that these non rejections can be explained by one episode the large appreciation and depreciation of the dollar in the 1980s by developing unit root tests which account for this event and maintain long run ppp using panel methods we can strongly reject the unit root null for those countries that adhere to the typical pattern of the dollar s rise and fall

excessive volatility in capital flows a pigouvian taxation approach this paper analyzes prudential controls on capital flows to emerging markets from the perspective of a pigouvian tax that addresses externalities associated with the deleveraging cycle it presents a model in which restricting capital inflows during boom times reduces the potential outflows during busts this mitigates the feedback effects of deleveraging episodes when tightening financial constraints on borrowers and collapsing prices for collateral assets have mutually reinforcing effects in our model capital controls reduce macroeconomic volatility and increase standard measures of consumer welfare

consumption in developing countries tests for liquidity constraints and finite horizons adjustment programs in developing countries emphasize the importance of reducing fiscal deficits in order to improve aggregate saving and investment performance recent theoretical analyses associated with the ricardian equivalence proposition however suggest that changes in the level of public sector saving may be offset by a change in private saving the empirical relevance of this proposition depends among other things on the length of consumers horizons and on the extent to which households are liquidity constrained empirical tests of a consumption model for a sample of developing economies do not support the equivalence propositions owing to the prevalence of liquidity constraints copyright 1989 by mit press

financial liberalization financial sector development and growth evidence from malaysia abstract the objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of malaysia using time series data from 1960 to 2001 we conduct cointegration and causality tests to assess the finance growth link by taking the real interest rate and financial repression into account the empirical evidence suggests that financial liberalization through removing the repressionist policies has a favorable effect in stimulating financial sector development financial depth and economic development are positively related but contrary to the conventional findings our results support robinson s view that output growth leads to higher financial depth in the long run

housing markets consumption and financial liberalisation in the major economies abstract this paper analyses the implications of relaxing credit restrictions in housing finance markets a theoretical model of the interaction of financial and housing markets and forward looking agents is developed the effects of financial liberalisation in the model are analysed and evidence from the u s a and u k on the impact of easing credit restrictions is presented estimates are also made of the degree to which credit restrictions may bind on households in those countries where the range of mortgage products on offer is still more limited than in the u k and u s a simulations are undertaken to gauge the effect on consumption saving and bequests of wealth of possible future convergence in national systems of housing finance

household saving micro theories and micro facts in this survey we review the recent theoretical and empirical literature on household saving and consumption the discussion is structured around a list of motives for saving and how well the standard theory captures these motives we show that almost all of the motives for saving that have been suggested in the informal saving literature can be captured in the standard optimizing model particular attention is given to recent work on the precautionary motive and its implications for saving and consumption behavior we also discuss the behavioral or psychological approach that eschews the use of standard optimization techniques and focuses instead on direct consideration on saving we provide a section on facts who save and how much we then discuss informally the recent decline in the u s saving rate and whether the theory is of much use in understanding this and other changes in aggregate saving rates over time we do not find any convincing explanation for the change in saving rates we also discuss some analyses of saving behavior over the life cycle addressing such questions as whether households save enough for retirement and whether the consumption patterns of older households can be rationalized within a simple life cycle model we also review a great number of studies of the consumption euler equations based on our analysis of the studies cited we conclude that there is still mixed evidence that consumption is excessively sensitive to income we also examine in depth the recent empirical literature on the precautionary motive we conclude that although some households do seem to have a significant precautionary motive at some points in their life cycle this motive is not so strong empirically as some investigators suggest

does financial reform raise or reduce saving the effect of financial liberalization on private saving is theoretically ambiguous not only because the link between interest rate levels and saving is itself ambiguous but also because financial liberalization is a multidimensional and phased process sometimes involving reversals using principal components we construct 25 year time series indices of financial liberalization for each of eight developing countries chile ghana indonesia korea malaysia mexico turkey and zimbabwe these are employed in an econometric analysis of private saving in these countries our results cannot offer support for the hypothesis that financial liberalization will increase saving on the contrary the indications are that liberalization overall and in particular those elements that relax liquidity constraints may be associated with a fall in saving

purchasing power parity and unit root tests using panel data abstract this paper reports the results of unit root tests for real exchange rates using a panel framework this panel approach provides greatly improved power compared to conventional univariate time series unit root tests we obtain evidence supporting ppp over the recent flexible exchange rate period for g 6 and oecd countries we show explicitly that failure to find such evidence in previous research was due to the low power of the tests

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null

real exchange rate behavior abstract using random simulations with artificial data with identical sample characteristics to the long sample exchange rate data employed by lothian and taylor lothian j r and taylor m p 1996 the recent float from the perspective of the past two centuries journal of political economy 104 488 509 we show that standard unit root tests have extremely low power over sample sizes corresponding to the recent float the probability of rejecting the null hypothesis when it is false is extremely low with 20 years or even 50 years of data and only reaches an acceptable level over much longer spans

financial deregulation and household saving the last decade has seen widespread domestic financial deregulation in the industrial world particularly in the united states united kingdom and the nordic countries resulting in an increase in competition both between banks and saving institutions thrifts or building societies as they moved into each others services and within each sector this opened up new financial options particularly for households the sector that was probably most affected by government regulation for example there was a significant increase in equity withdrawals from personal housing wealth in both the united kingdom and united states over the ig8os 2 this period also saw a significant change in household consumption behaviour the most dramatic illustration being the fall in the household saving ratio in those countries where the process of deregulation has gone furthest this paper reports the results from estimating a model of household saving using regional data for the united kingdom with a particular emphasis on the interaction between household saving and financial deregulation the estimates are used to calculate the relative importance of different factors in the fall in personal saving over the i98os i conclude that deregulation lowered the equilibrium level of saving over the i98os probably 2 percentage points per annum as well as making saving significantly more dependent on changes in wealth income and real interest rates there have been a number of earlier empirical studies looking at the interaction between financial deregulation and household behaviour manchester and poterba i 989 miles i 992 and koskela et al i 992 present empirical evidence on the interaction between deregulation the housing market and saving in the united states united kingdom and finland respectively others have estimated saving functions which include variables representing the effects of financial deregulation or have considered the impact of financial deregulation on liquidity constraints in consumption 3 the

neopatrimonialism and the political economy of economic performance in africa critical reflections during the past two decades neopatrimonialism has become the convenient all purpose and ubiquitous moniker for african governance the school of thought behind this research program which the author refers to as the neopatrimonialism school has produced an impressive literature on africa its analysis informs policymakers and its language permeates media reportage on african states while neopatrimonialism has long been a focus of development studies in recent times it has assumed politically and economically exigent status the school identifies causal links between neopatrimonialism and economic performance and makes predictions drawing from what is referred to as the logic of neopatrimonialism neopatrimonialism is said to account for trade policies hyperinflation economic stagnation low investment in infrastructure urban bias andultimately the lack of economic development in africa this article examines the empirical basis of predictions and policy prescriptions it argues that while descriptive of the social practices of the states and individuals that occupy different positions within african societies the concept of neopatrimonialism has little analytical content and no predictive value with respect to economic policy and performance

welfare gains from financial liberalization financial liberalization has been a controversial issue as empirical evidence for growth enhancing effects is mixed here we find sizable welfare gains from liberalization cost to repression though the gain in economic growth is ambiguous we take the view that financial liberalization is a government policy that alters the path of financial deepening while financial deepening is endogenously chosen by agents given a policy and occurs in transition towards a distant steady state this history dependent view necessitates the use of simulation analysis based on a growth model our application is a specific episode thailand from 1976 to 1996

capital controls on inflows exchange rate volatility and external vulnerability abstract we use high frequency data and a new econometric approach to evaluate the effectiveness of controls on capital inflows we focus on chile s experience during the 1990s and investigate whether controls on capital inflows reduced chile s vulnerability to external shocks we recognize that changes in the controls will affect the way in which different macro variables relate to each other in particular we consider the case where controls co exist with an exchange rate band aimed at managing the nominal exchange rate we develop a methodology to deal explicitly with the interaction between these two policies the main findings may be summarized as follows a a tightening of capital controls on inflows depreciates the exchange rate and b we find that a tightening of capital controls increases the unconditional volatility of the exchange rate but makes it less sensitive to external shocks

are real exchange rates nonstationary evidence from a panel data test it is well documented that real exchange rates between the united states and many industrialized countries in the post bretton woods period are integrated this result implies that purchasing power parity ppp does not hold even as a long run relationship this paper demonstrates that the failure to reject the unit root hypothesis may result from the low power of existing univariate test procedures i test for unit roots in real exchange rates by employing a more powerful panel based procedure using both cpi and wpi real dollar exchange rate data i strongly reject the null hypothesis of a unit root my results provide overwhelming support for the long run ppp under the current float copyright 1996 by ohio state university press

how effective are capital controls a number of authors have recently argued that in order to avoid financial instability emerging countries should rely on capital controls two type of controls have been considered controls on capital outflows and controls on capital inflows in this paper i review the historical evidence on the effectiveness of these two type of controls i argue that controls on outflows have been ineffective they are circumvented and breed corruption i also analyze chile s recent experience with controls on inflows and i argue that their effectiveness has been exaggerated

financial development international capital flows and aggregate output abstract we develop a tractable two country overlapping generations model and show that cross country differences in financial development can explain three recent empirical patterns of international capital flows financial capital flows from relatively poor to relatively rich countries while foreign direct investment flows in the opposite direction net capital flows go from poor to rich countries despite its negative net international investment positions the united states receives a positive net investment income international capital mobility affects output in each country directly through the size of domestic investment and indirectly through the aggregate saving rate under certain conditions the indirect effect may dominate the direct effect so that international capital mobility raises output in the poor country and globally although net capital flows are in the direction to the rich country we also explore the welfare and distributional effects of international capital flows and show that the patterns of capital flows may reverse along the convergence process of a developing country our model adds to the understanding of the costs and the benefits of international capital mobility in the presence of domestic financial frictions

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

the behavior of worker cooperatives the plywood companies of the pacific northwest using data collected by the authors on the largest and most durable of worker owned firms in u s manufacturing this paper is addressed to two questions first are the responses of cooperatives to changes in their economic environment different from those of conventional firms it appears that cooperatives are more inclined to adjust pay than employment second how profitable has membership in the cooperatives been using information on share prices the authors find membership to have been extremely profitable and in this sense the prices of co ops shares have been underpriced the riskiness of cooperative memberships is discussed copyright 1992 by american economic association

on cross country differences in the persistence of real exchange rates abstract previous findings of long run purchasing power parity come mainly from data for industrial countries raising the issue of whether the results suffer sample selection bias and exaggerate the general relevance of parity reversion this study uncovers substantial cross country heterogeneity in the persistence of deviations from parity the results show that it is more likely rather than less likely to find parity reversion for developing countries than industrial countries although some persistence variations may partly reflect country differences in structural characteristics such as inflation experience and government spending a considerable portion of those variations seems unaccounted for

intertemporal consumption durables and liquidity constraints a cohort analysis we provide a theoretical framework to analyse the response of life time maximizing consumers to intertemporal prices of non durable goods and durable goods when the borrowing limit depends on the market value of the stock of durables owned by the consumer we use pseudo panel data on purchases of non durables and durable goods cars and demographic characteristics from the uk family expenditure survey as well as estimates of the durable stock constructed using the uk national travel survey to estimate the equations derived in the first part of the paper we evaluate the shadow prices of these restrictions which were significantly positive for younger consumers in the mid seventies and immediately prior to the 1982 financial liberalisation

how does financial liberalisation affect the influence of monetary policy on the current account abstract does the current account improve or deteriorate following a monetary policy expansion we examine this issue theoretically and empirically we show that a standard open economy dsge model predicts that the current account response to a monetary policy shock depends on the degree of financial regulation in particular financial liberalisation makes it more likely that the current account deteriorates following a monetary expansion we test this theoretical prediction with a varying coefficient bayesian panel var model where the coefficients are allowed to vary as a function of the degree of financial product and labour market regulation on data from 1976q1 2006q4 for 19 oecd countries our empirical results support the theory we therefore conclude that following a monetary policy expansion the current account is more likely to go into deficit in countries with more liberalised financial markets

capital flow management measures what are they good for abstract are capital controls and macroprudential measures related to international exposures successful in achieving their objectives assessing their effectiveness is complicated by selection bias countries which change their capital flow management measures cfms often share specific characteristics and are responding to changes in variables that the cfms are intended to influence this paper addresses these challenges by using a propensity score matching methodology we also create a new database with detailed information on weekly changes in controls on capital inflows capital outflows and macroprudential measures related to international transactions from 2009 to 2011 for 60 countries results show that these macroprudential measures can significantly reduce some measures of financial fragility most cfms do not significantly affect other key targets however such as exchange rates capital flows interest rate differentials inflation equity indices and different volatilities one exception is that removing controls on capital outflows may reduce real exchange rate appreciation therefore certain cfms can be effective in accomplishing specific goals but most popular measures are not good for accomplishing their stated aims

household saving in developing countries first cross country evidence although most studies have relied on domestic or private sector saving data this article uses household data available from the u n system of national accounts for a sample of 10 countries household saving functions are estimated using combined time series and cross country observations in order to test households responses to income and growth rates of return monetary wealth foreign saving and demographic variables the results show that income and wealth variables affect saving strongly and in ways consistent with standard theories inflation and the interest rate do not show clear effects on saving which is also consistent with their theoretical ambiguity foreign saving and monetary assets have strong negative effects on household saving which suggests the importance of liquidity constraints and monetary wealth in developing countries

private saving in india this article studies the evolution of the private saving rate in india during 1960 9s its distinctive feature is that it proposes three new measures of private saving which are incremental improvements to the naive national accounts measure the improvements consist of accounting for capital losses to private net worth due to inflation including expenditures on durable goods as a form of saving and expanding the definition of saving to include human capital expenditures after examining descriptive trends and reviewing the related literature the article tests the hypothesis that households that save in india pierce the corporate veil the evidence shows that in fact changes in corporate saving are offset by changes in household saving indicating that the unit of analysis should be aggregate private saving the core analytical section of the article studies how the behavior of the private saving rate is related to the real interest rate per capita income the dependency ratio financial depth the government saving rate and the share of agriculture in gross domestic product the empirical analysis is done by estimating error correction models on aggregate annual data although most of the discussion centers on long run effects

is the uk balance of payments sustainable the uk current account deficit john muellbauer and anthony murphy the uk has a large and persistent current account deficit policy makers argue that the deficit is easily financed temporary and therefore not a sign of structural weakness we examine the conditions in which it is appropriate for a country to overspend its current income with the intention of repaying loans out of future income these include an increase in international capital mobility larger net holdings of foreign assets and expectations of faster productivity growth all three apply to the uk so official reasoning is in part correct even so for several decades there has been a trend deterioration of uk trade performance most markedly in manufacturing and we detect no underlying improvement in the 1980s we highlight structural deficiencies in both demand and supply on the demand side we show the importance of rising house prices and easier consumer credit in fuelling the consumer boom to an unwarranted extent this we trace to unjustifiable subsidies to house ownership on the supply side we stress vastly inadequate investment in skill formation education and physical capital these structural deficiencies lead us to a less optimistic view than official policy we draw the policy lessons for the uk and consider whether continental europe will face similar problems as financial markets are liberalized

financial development and economic growth abstract this paper examines the empirical relationship between long run growth and financial development proxied by the ratio between bank credit to the private sector and gdp we find that this proxy is positively correlated with growth in a large cross country sample but its impact changes across countries and is negative in a panel data for latin america we argue that the latter findings is the result of financial liberalization in a poor regulatory environment our findings also show that the main channel of transmission from financial development to growth is the efficiency rather than the volume of investment

house prices household saving and financial market liberalization in finland this paper describes some institutional aspects of housing markets and analyzes the price development of owner occupied housing and its interaction with the household saving ratio in finland during the last two decades in finland the volatility of house prices in relation to income can to a large extent be traced to the major changes in financial market conditions two other factors have also contributed to the house price volatility namely the favourable tax treatment of housing and othe r loans and the thin rental markets the former has increased the rate of retum on housing while the thin rental markets have resulted from rent regulation which has decreased the supply of rental housing the evidence suggests that in addition to the financial market conditions measured by the households indebtedness rate both the after tax rate of return and housing and the thinness of rental markets have all had a positive effect on house prices finally demographic factors seym to have some though relatively minor role in house price development while the real income variable cannot be estimated precisely as for the linkages between housing markets and saving behaviour our analysis lies in conformity with the view that the rate of change of real house prices has affected negatively and the after tax nominal interest rate positively the household saving ratio we are tempted to interpret these findings as suggesting that financial market conditions and particularly the financial market liberalization after the mid 1980 also explains the de cline in the household saving ratio during the housing market booms this abstract was borrowed from another version of this item

testing expected utility maximization under price and quantity risk with a heterogeneous panel refutable implications based on the curvature properties of the indirect utility function for the competitive firm operating under uncertainty are extended to the case of both price and quantity uncertainty using unit roots and cointegration tests for heterogeneous panels a model of us agricultural production is developed based on the time series properties of a panel of state level data most refutable hypotheses under output price and output quantity risk are not rejected but symmetry conditions implied by a twice continuously differentiable indirect utility function are rejected the same test conclusions are obtained from a traditional model that presumes stationarity in all variables

intersectoral financial flows in developing countries this paper is about financial flows in developing countries it reviews the evidence on who the borrowers and lenders are apart from collecting and summarizing available data from some seventeen countries the paper presents the results of an econometric analysis of the interactions between the net lending behaviour of the different sectors the paper is organized as follows section 2 clarifies some terms and in particular explains what a complete set of flow of funds accounts looks like section 3 provides an analytical framework for the consideration of flow of funds data section 4 reports the main data on sectoral surpluses and deficits and summarizes the empirical findings on their mutual interaction and on their determinants section 5 describes the typical pattern in developing countries of financial flows by instrument a summary and conclusion is presented in section 6

commodity currencies and the real exchange rate abstract this paper examines whether the real exchange rates of commodity exporting countries and the real prices of their commodity exports move together over time using international monetary fund imf data on the world prices of 44 commodities and national commodity export shares we construct new monthly indices of national commodity export prices for 58 commodity exporting countries over 1980 2002 evidence of a long run relationship between national real exchange rate and real commodity prices is found for about one third of the commodity exporting countries the long run real exchange rate of these commodity currencies is not constant as would be implied by purchasing power parity based models but is time varying being dependent on movements in the real price of commodity exports

institutions and savings in developing and emerging economies domestic savings are an important prerequisite for capital formation and growth in this paper we analyze a new channel through which institutions influence aggregate savings and economic development whereas research in the field of savings decisions concentrates largely on the level of the individual the literature on institutions and growth as well as on aggregate savings formation focuses on the aggregate national level first we develop a framework that brings together both lines of reasoning arguing that institutions may influence the individual savings decision as well as national savings in aggregate this potential for institutional quality to influence economic performance has been neglected so far second we build upon the empirical literature on aggregate savings formation and provide results supporting our hypothesis that better economic institutions drive aggregate savings formation upwards by contrast we do not find such effects in the case of the political environment our findings are robust when checked against a number of changes in explanatory variables estimation methods and the treatment of instruments

the assessment consumer expenditure this article aims to illuminate two sets of consumption puzzles the first concerns the behavior of aggregate saving rates in the 1980s and early 1990s collapse and rebound in scandinavia and the u k and apparently a more secular decline in the u s the second set of puzzles concerns various apparent contradictions of the rational expectations permanent income hypothesis e g in time series the excess sensitivity of consumption changes to anticipated income changes and in cross sections the tendency of consumption and income age profiles to follow each other more than standard life cycle theory implies the article discusses in relatively non technical terms the implications both for euler equations and solved out consumption functions of introducing uncertainty credit constraint consumption leisure interactions habits and durability alternative to rational expectations the illiquidity of some assets and financial deregulation it also compares the merits of euler and solved out models of aggregate consumption

taxation and household saving in open economies evidence from the nordic countries household saving behavior in the nordic countries is studied by trying to figure out the effects of tax factors on its level and fluctuations by and large the lower level of the household saving ratio in the nordic countries relative to the rest of the oecd can be accounted for by higher income taxation a lower unemployment rate as well as by demographics and the growth effect as regards fluctuations in the household saving ratio quarterly data from denmark finland norway and sweden over the period 1972 91 suggest that it is positively affected by real income growth and the inflation rate and negatively by real housing prices or real housing wealth copyright 1994 by the editors of the scandinavian journal of economics

the financial repression liberalization debate taking stock looking for a synthesis financial repression and liberalization became the object of fierce debates between academics and policy makers since the early 1970s as of the late 1980s financial liberalization became also part of the structural adjustment programs sponsored by the international monetary fund and the world bank however the literature on financial repression and liberalization remains controversial on its theoretical conclusions and policy implications given its importance for both the theory and policy of economic development and growth this paper looks for a possible synthesis after reviewing the theoretical contributions and empirical studies under the headings of the mckinnon shaw and new structuralists models the survey concludes that a new synthesis might be found in the post keynesian attempt to take an institutional perspective within a globalised financial and economic environment

the inequality credit nexus abstract this paper explores the inequality credit nexus from both a theoretical and an empirical perspective the paper develops an overlapping generation model in which the effect of income inequality on private credit depends on the countries per capita income and on the quality of laws protecting creditor rights the model predicts that greater inequality leads to higher levels of private credit in countries with low per capita incomes and weak legal rights while this effect is ambiguous or negative in economies with higher aggregate income and stronger credit protection using a panel dataset of 155 countries over the 1982 2015 period the paper shows empirical evidence that is robust and consistent with the model s predictions the paper s major finding suggests a credit channel through which inequality may affect economic outcomes

the harrod balassa samuelson hypothesis real exchange rates and their long run equilibrium the harrod balassa samuelson hypothesis frictionless perfectly competitive traded goods markets justify thinking of purchasing power parity ppp as the main driver of exchange rates in the long run but differences in the traded non traded sectors of economies tend to be persistent and affect movements in local price levels in ways that upset the ppp balance the underpinning of the harrod balassa samuelson hypothesis hbs this paper uses panel data techniques on a broad collection of countries to investigate the long run properties of the ppp hbs equilibrium using novel local projection methods for cointegrated systems these semi parametric methods isolate the long run behavior of the data from contaminating factors such as frictions not explicitly modelled and thought to have effects only in the short run absent the short run effects we find that the estimated speed of reversion to long run equilibrium is much higher in addition the hbs effects means that the real exchange rate is converging not to a steady mean but to a slowly to a moving target the common failure to properly model this effect also biases the estimated speed of reversion downwards thus the so called

capital controls and the real exchange rate do controls promote disequilibria abstract the consensus view is that capital controls can effectively lengthen the maturity composition of capital inflows and increase the independence of monetary policy but are not generally effective at reducing net inflows and influencing the real exchange rate this paper studies the adjustment dynamics of the real exchange rate towards its long run equilibrium and presents empirical evidence that capital controls increase the persistence of misalignments allowing the speed of adjustment to vary according to the intensity of restrictions on capital flows it is shown that the real exchange rate converges to its long run level at significantly slower rates in countries with capital controls this result is stronger when the exchange rate is undervalued and is independent of confounding factors such as the exchange rate regime and other forms of heterogeneity affecting the speed of adjustment i also find evidence that controls on capital inflows have greater effects than controls on outflows in addition while the combination of capital controls with a fixed or managed exchange rate regime significantly increases the persistence of misalignments controls appear to loose traction under more flexible exchange rate arrangements

euro area current account imbalances a tale of two financial liberalizations abstract this paper explores the extent to financial liberalization in the euro area had a differential impact on members current account positions theoretically it builds on an inter temporal consumption model augmented with household heterogeneity low middle income groups are impatient and constrained whilst high income groups are patient and under no constraint increased access to international credit in previously financially repressed countries implies a relaxation of collateral constraints specifically for the low skilled low middle income group who differently from high income agents borrows to finance current consumption it follows that financial liberalization is associated with deteriorating external positions there where initial levels of financial openness are lowest and the share of the low skilled low middle income group with potentially binding collateral constraints largest the same approach is useful to understand asymmetric current account reversals which relates to suddenly biting collateral constraints in indebted peripheral countries where the great recession hit disproportionally the low skilled

product safety liability r d and signaling the authors develop a monopoly model of product design and safety signaling incorporating a parametric liability specification the firm first engages in rd injuries lead to losses which are allocated by the liability system the authors vary the liability system s allocation of losses and trace out the implications for r d investment and the price safety relationship copyright 1995 by american economic association

credit rationing and capital accumulation with investment and consumption loans revisited abstract a simple model is developed to evaluate the roles of credit rationing and government policies of financial repression in the process of capital accumulation in the model credit rationing on both investment and consumption loans decreases as capital accumulates but increases as the government imposes policies of financial repression to a greater extent while a reduction in credit rationing on consumption loans impedes capital accumulation such a reduction on investment loans facilitates it we find that developing countries may be trapped at a low capital stock steady state while developed countries converge to a high capital stock steady state instead of adopting policies of financial liberalization interestingly this paper finds that policies of financial repression may enable developing countries to escape the development trap

controls on capital inflows do they work abstract this paper analyzes the effectiveness of controls on capital inflows in particular we analyze in great detail the chilean experience with the use of the unremunerated reserve requirement we examine the effects of the controls applied in chile in 1991 1998 on interest rates real exchange rate and the volume and composition of capital inflows the effects are elusive and it is difficult to pin down long run effects although after the unremunerated reserve requirement was introduced there was an increase in the interest rate differential the econometric evidence does not show it has a significant long run effect also we detect very small effects on the real exchange rate however the more persistent and significant effect is on the composition of capital inflows tilting composition toward longer maturity

fertility and the real exchange rate we use a quinquennial data set covering 87 countries between 1975 and 2005 to investigate empirically the relationship between fertility and the real effective exchange rate theoretically a country experiencing a decline in its fertility rate can be expected to experience a real depreciation we test and confirm this hypothesis controlling for a number of other potential determinants we find a statistically significant and robust link between fertility and the exchange rate our point estimate is that a decline in the fertility rate of one child per woman is associated with a depreciation of approximately 15 in the real effective exchange rate on utilise une base de donnees quinquennales pour 87 pays entre 1975 et 2005 afin d etudier empiriquement la relation entre fecondite et taux de change reel effectif theoriquement un pays qui fait l experience d un declin dans le taux de fecondite peut s attendre a une depreciation reelle on teste et on confirme que c est le cas en controlant un certain nombre d autres determinants potentiels il existe une relation significative et robuste entre fecondite et taux de change un declin du taux de fecondite d un enfant par femme est associea une depreciation d a peu pres 15 dans le taux de change reel effectif

consumption and capital market imperfections an international comparison the excess sensitivity of consumption to current income fluctuations is higher in countries where consumers borrow less low levels of consumer debt can result either from capital market imperfections or from a low demand for loans the evidence suggests that the former view is more appropriate than the latter and thus supports the hypothesis that excess sensitivity may be attributed to liquidity constraints rather than to other factors copyright 1989 by american economic association

stagflationary effects of monetary stabilization policies a quantitative analysis of south korea this paper presents a macro model of the korean economy that focuses on short run macro economic adjustment and more in particular on the transmission channels of monetary policy between the financial and the real sector of the economy in addition to the usual link between monetary policy and aggregate demand via investment the link between monetary policy and the supply side of the economy via the financing of working capital with borrowed funds is incorporated this link can potentially reverse the short run impact of tight money on inflation and aggregate the impact on output both export prices and domestic prices show a significant sensitivity to cost of financing working capital this credit supply side link gives a stagflationary bias to restrictive credit policies the empirical relevance of this phenomenon is strongly supported by the simulation results derived with the model structurally section 2 of the paper focuses on the real sector part of the model section 3 discusses the financial sector in section 4 different monetary stabilization packages are simulated using the model presented in sections 2 and 3 and alternative policy measures are discussed the simulation runs show strong short run stagflationary effects of tight money policies

saving determinants in colombia 1925 1994 abstract this paper analyzes the determinants of saving in colombia using the framework of an intertemporal model national saving partially responds to temporary changes in output according to the permanent income hypothesis higher government expenditures in relation to their permanent level are associated with lower national saving refuting the existence of ricardian equivalence the paper tests other common hypotheses in regard to saving behavior in particular we find that changes in national savings and changes in investment are perfectly correlated and that savings cause growth in the granger sense the results also indicate that increases in urbanization and age dependency have had a significantly negative effect on private saving in colombia finally we find that much of the recent reduction in private savings can be accounted by the effects of higher taxation

financial development and economic growth views and agenda this critique argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive first order relationship between financial development and economic growth the body of work would push even most skeptics toward the belief that the development of financial markets and institutions is a critical and inextricable part of the growth process and away from the view that the financial system is an inconsequential sideshow responding passively to economic growth many gaps remain however and the paper highlights areas in acute need of additional research

capital account liberalization as a signal the authors present a model in which a government s current capital control policy signals future policies controls on capital outflows evolve in response to news on technology conditional on government attitudes toward taxation of capital when there is uncertainty over governmental types a policy of liberal capital outflows sends a favorable signal that may trigger a capital inflow this prediction is consistent with the experience of several countries that have liberalized their capital accounts copyright 1997 by american economic association

consumption over the life cycle and over the business cycle the main aim of this paper is to assess the validity of the life cycle model of consumption in particular we address an issue that has recently received much attention especially in the macroeconomic literature that of excess sensitivity of consumption growth to income growth we do this using a time series of cross sections and a novel and flexible parameterization of preferences the former allows us to address aggregation issues directly while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth the main findings can be summarized as follows i the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables this is true both at life cycle and business cycle frequencies ii estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables including the level of consumption the eis increases with the level of consumption as expected iii the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle iv we are able to reconcile our results with those reported both in the macro and micro literature v in our specification the elasticity of intertemporal substitution is not very well determined this result however should be taken with care as we have not made an effort to construct a preferred specification which would probably include additional controls for labor supply behavior the evidence presented shows that the life cycle model cannot be easily dismissed indeed we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle