macroeconomic interdependence under capital controls abstract this paper studies the international transmission of monetary and fiscal disturbances under capital controls the results are contrasted with those that obtain under perfect capital mobility under perfect capital mobility permanent and unanticipated changes in domestic fiscal and monetary policies have no real effects abroad and the adjustment is instantaneous in contrast under capital controls these disturbances are transmitted abroad and adjustment occurs only over time the dynamic adjustment of the world economy is characterized by a negative co movement of domestic and foreign variables such as consumption the real interest rate and the real exchange rate

the political economy of public savings and the role of capital mobility abstract this paper explains public saving and investment in economies where many groups compete for scarce public funds we show that there is a collective action problem if there is no strong center then this problem manifests itself in a very low savings and investment rates in the extreme current spending may be determined simply by the current tax income and access to borrowing this explains why in the face of a temporary boom governments may not save but may even borrow more to finance even higher levels of expenditure we deal also with several mitigating factors repetition insiders outsiders interaction elections

commodity windfalls democracy and external debt we examine the effects that windfalls from international commodity price booms have on external debt in a panel of 93 countries during the period 1970 2007 our main finding is that increases in the international prices of exported commodity goods lead to a significant reduction in the level of external debt in democracies but to no significant reduction in the level of external debt in autocracies to explain this finding we show that in autocracies commodity windfalls lead to a statistically significant and quantitatively large increase in government consumption expenditures in democracies government consumption expenditures did not increase significantl

bullwhip and batching an exploration the rounding of orders to achieve a batch size is recognised as a source of the bullwhip problem within supply chains while it is often advocated that batch sizes should be reduced as much as possible there has been limited investigation into the impact of batching on bullwhip here we consider scenarios where orders are placed only in multiples of a fixed batch size for both deterministic and stochastic demand rates we derive a closed form expression for bullwhip when demand is deterministic this is validated through a simple model of a production control system an expression for bullwhip in a pass on orders scenario with stochastic demand is also derived and validated using simulation we show the impact of changing batch size on bullwhip in a production control system our results show that a manager may achieve economies through batching while minimising the impact on bullwhip through the careful selection of the batch size

the tragedy of the commons and economic growth why does capital flow from poor to rich countries we analyze a differential game in which all interest groups have access to a common capital stock we show that the introduction of a technology that has inferior productivity but enjoys private access may ameliorate the tragedy of the commons we use this model to analyze capital flight in many poor countries property rights are not well defined since safe bank accounts in rich countries the inferior technology are available to citizens of these countries they engage in capital flight we show that the occurrence of capital flight does not imply that opening the capital account reduces growth and welfare

does foreign aid increase private investment evidence from panel cointegration this article uses panel cointegration and causality techniques to examine the long run relationship between foreign aid and private investment our main result is that aid has a statistically significant negative effect on private investment this result is robust to outliers different measures and forms of aid sample selection and the sample period in addition we find that long run causality runs in both directions suggesting that an increase in aid reduces private investment and that in turn higher private investment leads to lower aid inflows

on the complementarity of commercial policy capital controls and inflation tax this paper studies the optimal use of distortive policies aimed at raising a given real revenue in a general equilibrium framework in which lump sum taxes are absent the policies analysed are an inflation tax commercial policy and an implicit tax on capital inflows it is shown that we would tend to avoid activating an inflation tax for small revenue needs if the policy target were allocative we would tend to use only one policy instrument thus each policy has its own comparative advantage and their combined use is justified when the target is raising government revenue

economic and political determinants of budget deficits in developing countries abstract the evidence from a large sample of developing countries tends to reject the empirical implications of optimizing models of the process of determination of fiscal deficits tax rates seigniorage and inflation the paper also presents some preliminary evidence that an important reason for the failure of the equilibrium approach to fiscal policy is that fiscal deficits are partly determined by political factors and that cross country differentials in budget deficits may depend on measures of political instability in particular as suggested by a number of recent theoretical approaches an increase in the degree of political instability appears to lead to greater budget deficits

flooded with debt this study explores if natural disasters are able to trigger a sovereign debt default natural disasters make the debt of a country less sustainable as they worsen the public finances of a country the main findings from our empirical analysis clearly indicate that large scale natural disasters increase significantly the onset probability of a sovereign debt default by about three percentage points it turns out that particularly major earthquakes and storms raise the likelihood of a default as they create the most widespread damage reported worldwide this will limit the debt servicing opportunities of a country in the future

the economics of poverty traps and persistent poverty an asset based approach abstract longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty while a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty this paper develops an asset based approach to poverty analysis that makes it possible to distinguish deep rooted persistent structural poverty from poverty that passes naturally with time due to systemic growth processes drawing on the economic theory of poverty traps and bifurcated accumulation strategies this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long term persistent structural poverty as well as relevant extensions of the popular foster greer thorbecke class of poverty measures the paper closes with reflections on how asset based poverty can be used to underwrite the design of persistent poverty reduction strategies

the dynamics of sovereign default risk and political turnover abstract this paper develops a stochastic dynamic politico economic model of sovereign debt to analyze the interaction of sovereign default risk and political turnover two parties differ in their preferred size of unproductive public spending which is financed by taxes and external debt electoral outcomes are characterized by the economic benefits from the incumbent s policies and stochastic idiosyncratic ideological aspects quantitative findings suggest that endogenous political turnover increases the discrepancies between the optimal borrowing and default policies of the two parties prior to a debt crisis the incumbent government accumulates external debt to foster the probability of remaining in power the dynamic interaction of electoral outcomes external debt and sovereign default supports arguments for imposing institutional constraints on incumbent governments

liberalizing foreign investments by pension funds positive and normative aspects abstract the paper evaluates the economics of foreign investment regulation for pension funds with a focus on developing countries where fully funded pension systems are being started de novo the analysis proceeds in three steps first it is argued that the benefits of global portfolio diversification apply particularly to developing country pension assets because the volatility of asset returns is high while the risk tolerance of pensioners is low second restrictions of foreign investmetn by domestic pension funds can hardly be justified on ground of financial development arguments the paper presents crosscountry evidence which shows little support for the claim that the accumulation of pension assets would provide strong externalities for financial development moreover the home bias generally observed in pension fund investment should translate into sufficient potential demand for domestic financial assets as to deepen markets and develop the institutional infrastructure third a case for initial localization requirements however can be derived from the fiscal costs of moving from unfunded to fully funded pension systems if fiscal illustion and domestic tax collection costs are important

external debt capital flight and political risk abstract this paper explains the simultaneous occurence of large external debts private capital outflows and low domestic capital formation we consider a general equilibrium model in which two government types with conflicting distributional goals randomly alternate in office uncertainty over the fiscal policies of future governments generates capital flight and small domestic investment and induces the government to overaccumulate external debt the model also predicts that left wing governments are more inclined to restrict capital outflows than right wing governments finally we examine how political uncertainty affects the risk premium and how debt repudiation may occur after a regime change

capital flight under uncertainty about domestic taxation and trade liberalization abstract this paper analyses in a simple general equilibrium framework how uncertainty regarding the future level of domestic taxes on factor incomes and regarding trade liberalization in an economy contemplating tariff reforms affects the overall volume of domestic investment and capital flight it is a variation of the alesina tabellini model alesina a tabellini g 1989 external debt capital flight and political risk journal of international economics 27 and brings out the importance of income effects in addition to substitution effects in determining how the volume of capital flight responds to changes in key policy uncertainty parameters

capital flight in the presence of domestic borrowing evidence from eastern european economies summary we estimate capital flight from 10 central and eastern european countries for the period 1996 2009 capital flight from the transition economies is mainly an economic phenomenon driven by differences in interest rates and investors perceptions of economic conditions in their countries as well as by the ease with which they are able to obtain funds that can be transferred overseas through domestic loans and capital inflows domestic credit expansion is an important source of financing for capital flight paradoxically financial liberalization has fueled rather than reduced capital flight by reducing its costs and increasing the funds that can be moved abroad

welfare dynamics in rural kenya and madagascar this paper presents comparative qualitative and quantitative evidence from rural kenya and madagascar in an attempt to untangle the causality behind persistent poverty we find striking differences in welfare dynamics depending on whether one uses total income including stochastic terms and inevitable measurement error or the predictable structural component of income based on a household s asset holdings our results suggest the existence of multiple dynamic asset and structural income equilibria consistent with the poverty traps hypothesis furthermore we find supporting evidence of locally increasing returns to assets and of risk management behaviour consistent with poor households defence of a critical asset threshold through asset smoothing

redistribution and non consumption smoothing in an open economy this paper presents a model where income distribution and redistributive fiscal policy interact to affect the budget deficit and the pattern of net borrowing of a country according to the standard representative agent paradigm a small open economy should smooth consumption by borrowing from lending to the rest of the world when its income increases declines over time the simple model of this paper delivers exactly the same predictions in the absence of income dispersion when income distribution is not degenerate however the same model gives rise to a surprising wealth of results in particular poor economies with high inequality may exhibit completely counter intuitive patterns of fiscal policy and external borrowing the country s production path declines over time because the more mobile agents leave the country to escape taxation yet the country might end up having a budget deficit and borrowing from abroad thereby reinforcing rather than smoothing the asymmetry in consumption between the two periods an important feature of this outcome is that it is backed by both the poor and the rich who gain from the fiscal system at the expense of the middle class

credibility and policy convergence in a two party system with rational voters the traditional approach to modeling political parties behavior based upon the contribution of anthony downs 1957 assumes that the parties unique objective is to win elections thus they maximize their popularity the crucial implication of this assumption for a two party system is that if the two parties have the same information about voters preferences full convergence of policies results from electoral competition this is the crucial implication of the median voter theorem more generally it may be argued that different parties are motivated differently because they represent different constituencies parties may not care only about winning elections per se but also about the quality of the policies resulting from an election in this case the candidates of the two parties view winning an election not only as a goal per se but also as a means of implementing a better policy for their respective constituencies this paper shows that electoral competitions imply dynamic inconsistency if the voters are modeled as rational and forwardlooking agents and parties do not care exclusively about being elected but also about which policy to implement once elected the dynamic inconsistency arises as follows the parties have an incentive to announce convergent platforms to increase their chances of election however if the elected party is not committed to its electoral platform it has an incentive to follow its most preferred policy rather than the policy announced in its platform if voters are rational they account for this incentive thus in general in a one shot electoral game the only timeconsistent equilibrium is one in which no convergence is possible the two parties follow their most preferred policies and the voters rationally expect this outcome full convergence of parties platforms results only as a limiting case when the parties are completely indifferent with respect to the quality of the policies resulting from the election thus these results differ from the existing literature on ideologically motivated politicians for instance donald wittman 1977 1983 randall calvert 1985 which implicitly assumes the possibility of binding commitments to electoral platforms complete or partial policy convergence can be the outcome of political competition if the interaction between the parties and the voters is modeled as an infinitely repeated game in fact if the candidates have concave objective functions the welfare maximizing policy rule implies a complete convergence of parties policies however this cooperative and agreed upon policy may or may not be sustainable as a subgame perfect equilibrium depending on parameter values in particular it depends on the discount rates of the two parties the degree of polarization of their preferences and the relative popu graduate school of industrial administration carnegie mellon university pittsburgh pa 15213 and national bureau of economic research cambridge ma 02138 this paper is based upon a chapter of my unpublished doctoral dissertation at harvard university i am greatly indebted to jeffrey sachs for directing my attention toward these issues and for many conversations i also wish to thank andrew abel dilip abreu olivier blanchard ramon caminal andrew caplin alex cukierman morris fiorina benjamin friedman herschel grossman howard rosenthal and the referees for very useful comments the responsibilitv af anv n mtnkieis af calrirp nfnlv mine the result of policy convergence in a two party system is more general than the median voter theorem for discussions of convergence results not at the median see john ledyard 1984 peter coughlin 1984 coughlin and shmuel nitzan 1981 melvin hinich 1977 for earlier work on spatial competition see richard mckelvey 1975 hinich ledyard and peter ordeshook 1972 1973 and the references quoted therein the present paper focuses on the result of convergence rather than on the median voter theorem per se

on the hidden links between financial and trade opening abstract developing countries characterized by high costs of tax collection and enforcement opt to use financial repression as an implicit tax on savings providing the impetus for capital flight a mechanism facilitating illicit capital movements is trade misinvoicing where the effectiveness of capital controls would increase with the resources spent on monitoring and enforcement per one dollar of international trade under these circumstances greater trade openness increases the effective cost of enforcing financial repression thereby reducing the usefulness of financial repression as an implicit tax this in turn implies that financial reforms tend to be the by product of greater trade integration

bribery and public debt repudiation in cases where policy makers accept bribes offered by organised lobbies or interestedparties government decisions can be modelled as a first price menu auction in this paper we adaptthis structure to model debt repudiation we considera one period model in which two generations parents and children are present and debt titles are unevenlydistributed among parents the government can repaythe debt by a combination of taxes on the children sincome and on the outstanding debt we excludeintergenerational conflicts assuming that the parents and children s objective is to maximise the utility ofthe family in this perspective families make offersthat relate monetary contributions to the taxstructures chosen by the government on the hypothesisthat all interests are represented we obtain theresult that the government is indifferent to the taxstructure

capital account liberalization what do cross country studies tell us capital account liberalization it is fair to say remains one of the most controversial and least understood policies of our day one reason is that different theoretical perspectives have very different implications for the desirability of liberalizing capital flows another is that empirical analysis has failed to yield conclusive results the answer another influential strand of thought contends is that this efficient markets paradigm is fundamentally misleading when applied to capital flows limits on capital movements are a distortion it is an implication of the theory of the second best that removing one distortion need not be welfare enhancing when other distortions are present

information distortion in a supply chain the bullwhip effect this article originally appeared in management science april 1997 volume 43 number 4 pp 546 558 published by the institute of management sciences consider a series of companies in a supply chain each of whom orders from its immediate upstream member in this setting inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions this paper claims that the information transferred in the form of orders tends to be distorted and can misguide upstream members in their inventory and production decisions in particular the variance of orders may be larger than that of sales and distortion tends to increase as one moves upstream a phenomenon termed bullwhip effect this paper analyzes four sources of the bullwhip effect demand signal processing rationing game order batching and price variations actions that can be taken to mitigate the detrimental impact of this distortion are also discussed

partisanship and the path to financial openness the effect of traditional left right economic preferences on countries international financial openness is more subtle than existing studies have recognized the authors investigate the role that partisan politics played in the liberalization of international financial markets within 12 western european democracies from 1960 to 1986 the authors find that right governments tended to be active liberalizers of the capital account they were more likely than left governments to enact liberalizations and liberalizations were especially likely when new right governments entered office left governments typically acquiesced to these changes although less likely to enact liberalizations they were no more likely to impose new restrictions the authors findings are consistent with studies that show how financial integration does not undermine welfare states but is still subject to partisan contention

multimarket analysis of agricultural price policies in an operational context the case of cyprus this article presents a method of analysis of agricultural price policies its basic features are i the incorporation of important supply and demand substitution possibilities ii a flexible structure which can account for institutional features of the agricultural sector and its relationships with the rest of the economy and iii a focused policy oriented approach an application to cyprus is presented which highlights the differences between this approach and analyses of single markets the method incorporates supporting software on personal computers with the longer term objective of developing this type of approach as a standard tool in pricing policy analysis

properties of lot sizing rules under lumpy demand when a lot sizing problem is viewed from a context of buyer supplier relationships an important phenomenon frequently encountered by the supplier is a so called lumpy demand however there has been very little attention devoted to study the behaviour and performances of lot sizing rules under the situation of lumpy demand this paper presents both analytical and experimental studies of lot sizing rules for lumpy demand situations the analytical study is based on the assumption that constant demand occurs for every fixed number of periods in the experimental study both the quantity of and the time between demands are allowed to vary the studies show that analytical results provide good insights in understanding the behaviour and performances of lot sizing rules when more realistic situations are addressed in the experimental study the paper also confirms that the results of lot sizing studies under the situation of non lumpy demand cannot be entirely generalised to the situation with lumpy demand r 2002 elsevier science b v all rights reserved

the variability of aggregate demand with s s inventory policies this paper develops a general theory of the aggregate implications of s s inventory policies it is shown that s s policies add to the variability of demand with the variance of orders exceeding the variance of sales overall the s s theory contradicts the widely held notion that retail inventories act as a buffer protecting manufacturers from fluctuating sales in 1951 arrow harris and marschak 3 introduced the s s form of inventory policy the policies are designed for retailers of finished goods who face economies of scale when placing orders with their suppliers to pursue an s s inventory policy the retailer establishes a lower stock point s and an upper stock point s no order is placed until inventories fall to s or below whereupon they are restored to the maximum of s a general proof of the optimality of these s s inventory policies was provided by scarf 13 at the microeconomic level the model has been extensively investigated formulae are available to compute optimal policies e g ehrhardt 6 and these policies are xidely used in industry e g schwartz ed 14 in addition the model has been extended to increasingly complex demand environments e g karlin and fabens 11 in contrast little is known about the macroeconomic implications of s s policies several recent papers have begun to correct this deficiency akerlof has suggested that pursuit of constant threshold money holding policies of the s s variety might be responsible for the observed low short run income elasticity of the demand for money akerlof 1 and akerlof and milbourne 2 in the operations research literature ehrhardt schultz and wagner 7 analyzed the demand environment of a wholesaler supplying several retailers they required that the distinct retailers have independent sales ruling out the analysis of common factors in sales finally simulation results of blinder 4 suggested a role for the s s model in understanding retail sector inventories however the theoretical difficulties with the model remained unresolved blinder commented if firms have a technology that makes the s s rule optimal aggregation across firms is inherently difficult indeed it is precisely this difficulty which has prevented the s s model from being used in empirical work to date blinder 4 p 459 in this paper we present a general theory of the aggregate implications of s s policies our central finding is that s s policies add to the variability of demand with the variance of orders exceeding the variance of sales this result holds even in the presence of common factors in retail sales in addition a close connection

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

understanding economic policy reform one of the eventual consequences of the global debt crisis was a wave of market oriented economic reforms this paper discusses the state of our knowledge on the political economy of this process why were inefficient and often unsustainable policies maintained for so long why are so many governments reforming now after decades of adherence to policies of an opposite kind have the reformers internalized the correct lessons from the east asian experience finally are there any helpful rules for reformers to follow in guiding their policies through complicated political terrain

why a stubborn conservative would run a deficit policy with time inconsistent preferences a conservative government in favor of a low level of public consumption knows that it will be replaced by a government in favor of a larger level of public consumption we show that the resulting level of public consumption is in between the levels the two governments would choose if each were in power both in the present and in the future in particular we show that if the conservative government is more stubborn in a particular sense than the succeeding government the conservative government will borrow more than it would had it remained in power in the future

the liquidation of government debt high public debt often produces the drama of default and restructuring but debt is also reduced through financial repression fr a tax on bondholders and savers via negative or below market real interest rates after world war ii capital controls and regulatory restrictions created a captive audience for government debt limiting tax base erosion fr is most successful in liquidating debt when accompanied by inflation for the advanced economies real interest rates were negative half of the time during 1945 80 average annual interest expense savings for a 12 country sample range from about 1 to 5 of gdp for the full 1945 80 period we suggest that once again fr may be part of the toolkit deployed to cope with the most recent surge in public debt in advanced economies

capital controls collection costs and domestic public debt abstract the implications of a large public debt for the implementation of capital controls for an economy where tax revenue collection is costly are examined conditions are analyzed under which policymakers will resort to capital controls to reduce the cost of recycling domestic public debt the linkages between a costly tax collection mechanism capital controls and domestic government debt are explored in terms of a two period model of optimal taxation numerical simulations are provided to illustrate how capital controls are linked to different domestic public debt levels and to different degrees of efficiency in tax revenue collection

explaining fiscal policies and inflation in developing countries abstract in this paper we investigate empirically the determinants of inflation seigniorage and fiscal deficits in developing countries we first test the optimal taxation theory of inflation for a group of 21 lcds we find that the implications of this theory are rejected for all these countries we then proceed to implement a number of tests based on the new political economy approach to macroeconomic policies we deal with some of the implications of a credibility and reputation model and of a strategic government behavior model we find that the data support the most important predictions of the political economy view of fiscal policy our measures of political instability and political polarization play an important role in explaining cross country differences in seigniorage inflation government borrowing and fiscal deficits we end by discussing directions for future research

intergenerational policies public debt and economic growth a politico economic analysis abstract this study presents a two period overlapping generations model with endogenous growth in each period the government representing young and old generations provides a public good financed by labor income taxation and public debt issuance and the government s policies are determined by probabilistic voting increased political power of the old lowers economic growth a debt ceiling rule is considered to resolve the negative growth effect but it creates a trade off between generations in terms of welfare

missing women and the price of tea in china the effect of sex specific earnings on sex imbalance economists have long argued that the sex imbalance in developing countries is caused by underlying economic conditions this paper uses exogenous increases in sex specific agricultural income caused by post mao reforms in china to estimate the effects of total income and sex specific income on sex differential survival of children increasing female income holding male income constant improves survival rates for girls whereas increasing male income holding female income constant worsens survival rates for girls increasing female income increases educational attainment of all children whereas increasing male income decreases educational attainment for girls and has no effect on boys educational attainment

investment in the shadow of conflict globalization capital control and state repression in conflict prone societies the fear of expropriation that accompanies a regime change reduces capital investment these reductions in investments in turn harm the economy amplifying the likelihood of regime change this article studies the implications of these feedback channels on the interactions between globalization capital control state repression and regime change i show that processes that facilitate capital movements e g globalization economic modernization and technologies that reduce transportation costs amplify the likelihood of regime change in conflict prone societies and strengthen the elite s demand for a strong coercive state in particular to limit their collective action problem and manage the political risk of regime change capitalists support a state that imposes capital control we identify two conflicting forces the boix effect and the marx effect which determine when capital control and state repression become complements nazi germany or substitutes latin american military regimes in right wing regimes

inventory performance under pack size constraints and spatially correlated demand abstract motivated by a problem facing a large retailer we consider the impact of pack size on the performance of a periodic review inventory system in the presence of spatial i e between retailers correlation of demand which we model using an equicorrelated multivariate poisson distribution employing simulation we utilise a full factorial experiment to provide support for decisions on product and supplier selection and whether or not packs should be split during distribution we consider variables such as pack size correlation and the number of branches and discuss how they and their interactions impact performance metrics such as inventory and shortage levels and the bullwhip effect

elections capital flows and politico economic equilibria we study an open economy where a pro labor and a pro business candidate compete in an election the winner chooses taxes which affect investment returns electoral outcomes depend on the size of the foreign debt but the debt itself reflects expectations about the election the resulting interaction is novel and has several implications elections are associated with increased volatility politico economic crises can occur inefficiencies vanish if the candidates commit to an appropriate tax policy but such commitments have predictable effects on the election empirical evidence supporting the theory is discussed jel d72 f34 o17 o19

sovereign default interest rates and political uncertainty in emerging markets abstract a large body of the empirical literature shows that high turnover rates length of tenure of policymakers and the degree of conflict within a country affects sovereign spreads debt and default rates we help to rationalize such claims by including these political features in a dynamic stochastic small open economy model of sovereign debt and default in this way we offer a complementary approach to the econometric analyses in the literature consistent with the data the quantitative analysis shows that politically unstable and more polarized economies experience higher default rates and larger level and volatility of sovereign interest rate spreads

managing supply chain demand variability with scheduled ordering policies this paper studies supply chain demand variability in a model with one supplier and n retailers that face stochastic demand retailers implement scheduled ordering policies orders occur at fixed intervals and are equal to some multiple of a fixed batch size a method is presented that exactly evaluates costs previous research demonstrates that the supplier s demand variance declines as the retailers order intervals are balanced i e the same number of retailers order each period this research shows that the supplier s demand variance will generally decline as the retailers order interval is lengthened or as their batch size is increased lower supplier demand variance can certainly lead to lower inventory at the supplier this paper finds that reducing supplier demand variance with scheduled ordering policies can also lower total supply chain costs

assets and poverty traps in rural bangladesh using longitudinal survey from rural bangladesh this article examines the determinants of land and asset accumulation over time and explores why some households may be trapped in asset poverty non parametric and parametric methods are used to discern the shape of the asset accumulation path and whether unique or multiple equilibria exist we find evidence for concavity of the dynamic asset frontier but no evidence for multiple equilibria it is suggested that the existence of well functioning factor markets in rural bangladesh and elsewhere in south asia explain the contrasts between our results and those for several african countries

joint titling in rural peru impact on women s participation in household decision making summary peru has implemented joint property rights between spouses and cohabitants on 57 of 1 5 million formalized agricultural plots bargaining theory indicates such redistribution of assets should empower women this project measures influence on decision making in 1 280 rural households interviewing man and woman separately a historical coincidence during the land reform of the 1960 70s made only some communities eligible for plot titling the process was exogenous and independent of both household and community characteristics the significantly positive impact on female empowerment in simple mean comparison and econometric models including pre titling historic variables is hence unbiased

exploring poverty traps and social exclusion in south africa using qualitative and quantitative data abstract recent theoretical work hypothesises that a polarised society like south africa will suffer a legacy of ineffective social capital and blocked pathways of upward mobility that leaves large numbers of people trapped in poverty to explore these ideas this paper employs a mix of quantitative and qualitative methods novel econometric analysis of asset dynamics over the 1993 98 period identifies a dynamic asset poverty threshold that signals that large numbers of south africans are indeed trapped without a pathway out of poverty qualitative analysis of this period and the period 1998 2001 more deeply examines patterns of mobility and confirms the continuation of this pattern of limited upward mobility and a low level poverty trap in addition the qualitative data permit a closer look at the specific role played by social relationships while finding ample evidence of active social capital and networks these are more helpful for non poor households for the poor social capital at best helps sta

flight capital as a portfolio choice the authors examine flight capital in the context of portfolio choice they estimate the stock of flight capital held abroad and compare it with the stock of real nonfinancial capital held within each country for 51 countries they construct estimates as of 1990 of private domestic capital and flight capital which combined add up to domestic wealth there are large regional differences in the proportion of private wealth that is held abroad ranging from 3 percent in south asia to 39 percent in africa they explain differences in portfolio choice in terms of the capital to labor ratio indebtedness exchange rate distortions and risk ratings all proxies for differences in the risk adjusted rate of return on capital they then apply the results to four policy questions in which private portfolio choices are potentially important the effect of the east asian crisis on domestic capital outflows spillovers the effect of hipc debt relief on capital repatriation and why africa has so much of its private wealth outside the continent their conclusions 1 the four most severely affected east asian countries will eventually lose about 250 billion in domestic wealth as a result of the deterioration in risk between march 1997 and september 1998 2 they found some support for a spillover model 3 the effect of the hipc debt relief initiative on capital repatriation will vary massively between hipc eligible countries 4 africa has by far the lowest capital per worker which makes massive capital flight from africa all the more distinctive three variables explain capital flight in africa exchange rate overvaluation adverse investor risk ratings and high indebtedness

optimal financing of the government s budget taxes bonds or money financing of the government s budget in particular we consider taxation bond issuance and money creation as alternative means of financing these issues are not new some of them were extensively explored in the public finance literature some of them were explored in the monetary theory literature what we believe to be new however is that our work integrates the relevant elements from both strands of literature into a unified general equilibrium framework with this approach we are able to jointly determine the optimal combination of tax rates the rate of inflation and the interest rate on government bonds this type of analysis enables us to ask whether the rate of inflation should be positive or negative and to provide simple conditions on compensated demand elasticities which determine the answer it also enables us to reconsider milton friedman s optimum quantity of money rule in a public finance framework without lump sum taxes and to show how this rule should be modified in addition we provide insight into the desirability of a social security scheme by showing that such a program is undesirable when social security payments are financed

the impact of group based credit programs on poor households in bangladesh does the gender of participants matter this paper estimates the impact of participation by gender in the grameen bank and two other group based micro credit programs in bangladesh on labor supply schooling household expenditure and assets the empirical method uses a quasi experimental survey design to correct for the bias from unobserved individual and village level heterogeneity we find that program credit has a larger effect on the behavior of poor households in bangladesh when women are the program participants for example annual household consumption expenditure increases 18 taka for every 100 additional taka borrowed by women from these credit programs compared with 11 taka for men

risky business political instability and greenfield foreign direct investment in the arab world which foreign direct investments are most affected by political instability analysis of quarterly greenfield investment flows into countries in the middle east and north africa during the period from 2003 to 2012 shows that adverse political shocks are associated with significantly reduced investment inflows in the non resource tradable sectors by contrast investments in natural resource sectors and non tradable activities appear insensitive to such shocks political instability is thus associated with increased reliance on non tradables and aggravated resource dependence

global political risk and currency momentum using a measure of political risk relative to the united states that captures unexpected political conditions we show that political risk is priced in the cross section of currency momentum and contains information beyond other risk factors our results are robust after controlling for transaction costs reversals and alternative limits to arbitrage the global political environment affects the profitability of the momentum strategy in the foreign exchange market investors following such strategies are compensated for the exposure to the global political risk of those currencies they hold that is the past winners and exploit the lower returns of loser portfolios the risk compensation is mainly justified by the different exposures of foreign currencies in the momentum portfolio to u s political shocks which is the main component of global political risk

one kind of freedom poverty dynamics in post apartheid south africa abstract a 1993 south african living standards survey documented the legacy of apartheid in the form high levels of inequality and human insecurity drawing on a 1998 re survey of households in the 1993 study this paper explores whether this legacy has been superseded or whether apartheid s end has been only one kind of freedom that has left households in a poverty trap from which they cannot escape after proposing a theoretically grounded dynamic poverty typology that distinguishes stochastic from structural poverty transitions the paper goes on to estimate that significant numbers of the south african poor are potentially trapped in a structural poverty trap and lack the means to escape poverty over time

capital controls re examined the case for smart controls the global financial crisis which began in east asia in 1997 is not over neither is the inquest into its implications for adjustment policy in the wake of this crisis we focus here on the role of capital controls which formed a much publicised part of the crisis coping strategy in one country malaysia and less openly were also deployed by other crisis afflicted countries evaluation so far has examined different target variables with different estimation methods generally concentrating on efficiency and stability indicators and ignoring equity measures it has also typically treated control as a one zero dummy variable ignoring the quality of intervention and in particular the extent to which efficiency gains are obtained in exchange for controls partly because of these limitations the literature has reached no consensus on the impact of controls nor therefore about where they fit within the set of post crisis defence mechanisms we propose an approach in which the government plays off short term political security against long term economic gain the more insecure its political footing the greater the weight it gives to political survival which is likely to increase the probability of controls being imposed the modelling of this approach generates a governmental policy reaction function and an impact function for controls which are estimated by simultaneous panel data methods across a sample of thirty developing and transitional countries between 1980 2003 using for the period since 1996 the new imf dataset which differentiates between controls by type we find that controls appear to cause increases in income equality and are significantly associated with political insecurity and relatively low levels of openness to trade they do not in our analysis materially influence the level of whole economy productivity or gdp across the sample of countries examined although they do influence productivity in particular sectors in particular manufacturing but the dispersion around this central finding is wide the tendency for controls to depress productivity by encouraging rent seeking sometimes is and sometimes is not counteracted by purposive government policy actions to maintain competitiveness whether or not this happens whether as we put it controls are smart and the manner in which they are smartened is vital on both efficiency and equity grounds we devise a formula for and make the case for capital controls which are time limited and contain an inbuilt incentive to increased productivity as a means of improving the sustainability and equity of the adjustment process whilst keeping to a minimum the cost in terms of productive efficiency

public debts and private assets explaining capital flight from sub saharan african countries we investigate the determinants of capital flight from 30 sub saharan african countries including 24 countries classified as severely indebted low income countries for the period 1970 1996 the econometric analysis reveals that external borrowing is positively and significantly related to capital flight suggesting that to a large extent capital flight is debt fueled we estimate that for every dollar of external borrowing in the region roughly 80 cents flowed back as capital flight in the same year capital flight also exhibits a high degree of persistence in the sense that past capital flight is correlated with current and future capital flight the growth rate differential between the african country and its oecd trading partners is negatively related to capital flight we also explore the effects of several other factors inflation fiscal policy indicators the interest rate differential exchange rate appreciation financial development and indicators of the political environment and governance we discuss the implications of the results for debt relief and for policies aimed at preventing capital flight and attracting private capital held abroad

on bullwhip in supply chains historical review present practice and expected future impact abstract demand amplification or bullwhip as it is now called is not a new phenomenon since evidence of its existence has been recorded at least as far back as the start of the 20th century and is well known to economists yet industry worldwide still has to cope with bullwhip measured not just in terms of the 2 1 amplification which is frequently quoted but sometimes it is as high as 20 1 from end to end in the supply chain this can be very costly in terms of capacity on costs and stock out costs on the upswing and stockholding and obsolescence costs on the downswing in this paper we have identified 10 published causes of bullwhip all of which are capable of elimination by re engineering the supply chain we offer evidence on the present health of a family of supply chains and pinpoint much good practice this is in anticipation that such excellence will become normative in the near future as the learning experience gathers momentum and provided that human factors are properly addressed

public debt sustainability and endogenous seigniorage in brazil time series evidence from 1947 1992 abstract in this paper we investigate three central issues in public finance first was the path of public debt sustainable during 1947 1992 second how has the government balanced the budget after shocks to either revenues or expenditures were observed third are expenditures exogenous the results show that i debt is sustainable in econometric tests with the budget being balanced almost entirely through changes in taxes regardless of the cause of the initial imbalance expenditures are weakly exogenous ii the behavior of a rational brazilian consumer may be consistent with ricardian equivalence iii seigniorage revenues are critical in restoring intertemporal budget equilibrium

shocks and their consequences across and within households in rural zimbabwe abstract increasing attention is now being paid to poverty dynamics in developing countries this work links the extent to which households smooth consumption or smooth assets given income shocks the empirical evidence on the churning of households in and out of poverty and the possibility that temporary shocks can have permanent consequences using longitudinal data from rural zimbabwe this paper extends the discussion of these issues by disaggregating the impact of shocks by levels of asset holdings by disaggregating the impact of shocks on individual level welfare and by assessing the extent to which such shocks have permanent consequences by doing so it assesses the validity of distinguishing between asset and consumption smoothing and provides insights into whether poverty dynamics assessed at the household level provide an adequate picture of dynamics at the individual level

capital flight to germany two alternative measures abstract we use two measures to study two capital flight channels for germany one measure is based on the concept of trade misinvoicing and one on net claims and liabilities in the eurosystem of central banks for both measures we propose refinements to enhance the assessment of capital flight we find that capital flight towards germany via these two channels has been quite sizable in the recent decade and can tally to about 2 of gdp annually regarding their determinants we show that the two capital flight measures are driven by both common and measure specific factors traditional determinants such as covered interest differentials only play a limited role while crisis specific factors such as economic policy uncertainty the ecb collateral policy as well as currency misalignment are driving factors of the investors apparent flight to safety behavior

optimal centralized ordering policies in multi echelon inventory systems with correlated demands this paper treats a depot warehouse system in which demand occurs at the warehouse or retail level this work differs from a number of other studies in that we allow item demands to be correlated both across warehouses and also correlated in time our motivation for this generalization arises from our experience with an actual system of this type used by a major national producer and distributor of consumer products we observed both high correlations between successive monthly demands around 0 7 and correlations between demands for an item at different locations also about 0 7 in a given time period we derive an explicit expression for the optimal safety stock as a function of the level of correlation through time the analysis requires two assumptions 1 the allocation assumption and 2 the equal coefficient of variation assumption similar assumptions have been used by other researchers finally numerical evaluations are included to illustrate the impact of the various magnitudes of correlation

the politics of adjustment lessons from the imf s extended fund facility the international debt crisis has forced painful economic adjustments on the developing world in the short run it has forced governments to seek to correct payments imbalances through stabilization programs usually undertaken with conditional assistance from the international monetary fund imf the crisis has also revealed deeper weaknesses in many third world economies weaknesses demanding more basic reforms in the structure of incentives prices and investment

voting on the budget deficit this paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending all voters agree that a balanced budget is ex ante optimal however if there is disagreement between current and future majorities a balanced budget is not a political equilibrium under majority rule under certain conditions a majority of the voters favors a budget deficit and the equilibrium deficit is larger the greater is the polarization among voters copyright 1990 by american economic association

the sustainable development consequences of imf debt vs capital control comparing progress in gpi and gdp terms for korea and malaysia abstract the panic wrought by the 1997 asian financial crisis spurred different mitigative measures some states assented to imf bailout and restructuring while others enforced capital control since then despite intense academic and regulatory scrutiny of the nuances of the recession empiric focus on recovery trajectory of affected countries centred chiefly around traditional gdp metrics an approach that disregards economic performance in a manner congruent with sustainable development goals sdg in this paper we adopt a broader sdg compatible approach by tracking two affected countries korea and malaysia recovery via operationalizing an alternative growth indicator gpi genuine progress indicator first we construct a 35 year long gpi index from 1980 to 2014 and employ the solow growth model to measure the impact of the two remedial measures on gdp and gpi of both countries employing an ardl approach we find external debt to impact significantly the gdp and gpi of korea meanwhile for malaysia the controversial capital control failed to register significant impact moreover unemployment rates trade openness fixed capital formation and the history of previous crises are found to be influential determinants of gdp and gpi with credit and exchange rate variables showing ambiguous results

financial liberalisations in latin america in the 1990s a reassessment this paper studies the experience of latin america latam with financial liberalisation in the 1990s the rush towards financial liberalisations in the early 1990s was associated with expectations that external financing would alleviate the scarcity of saving in latam thereby increasing investment and growth yet the data and several case studies suggest that the gains from external financing are overrated the bottleneck inhibiting economic growth is less the scarcity of saving and more the scarcity of good governance a possible interpretation for these findings is that in countries where private savings and investments were taxed in an arbitrary and unpredictable way the credibility of a new regime could not be assumed or imposed instead credibility must be acquired as an outcome of a learning process consequently increasing the saving and investment rates tends to be a time consuming process this also suggests that greater political instability and polarisation would induce consumers to be more cautious in increasing their saving and investment rates following a reform hence reaching a sustained take off in latin america is a harder task to accomplish than in asia

who is afraid of political instability abstract an unstable macroeconomic environment is often regarded as detrimental to economic growth among the sources contributing to such instability much of the blame has been assigned to political issues this paper empirically tests for a causal and negative long run relation between political instability and economic growth but finds no evidence of such a relationship sensitivity analysis indicates that there is a contemporaneous negative relationship but also that in the long run and ignoring institutional factors the group of african countries plays the determining role

globalization and developing countries a shrinking tax base abstract this paper evaluates the impact of globalisation on tax bases of countries at varying stages of development we see globalisation as a process that induces countries to embrace greater trade and financial integration this in turn should shift their tax revenue from easy to collect taxes tariffs and seigniorage towards hard to collect taxes value added and income taxes we find that trade and financial openness have a positive association with the hard to collect taxes and a negative association with the easy to collect taxes

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

enabling mini grid development in rural india summary rural electrification rates in india lag behind government goals in part due to the inability of distribution companies discoms to fund central grid expansion in the absence of central grid electrification mini grids offer significant potential for an immediate pathway toward rural electrification and the attendant gains in economic growth and productivity yet private investment in mini grids has been virtually absent in india using a comprehensive life cycle cost analysis we find that mini grids based on solar pv power and storage are more economical than incumbent energy services available to households without central grid connection under current law a prospective entrepreneur in india does not require a license or certification in order to build a mini grid and subsequently provide electricity services in the area covered by said installation conversely there is no legal or regulatory framework that specifies what is to happen if the central grid were to be extended to an area that is already covered by a mini grid we report detailed survey evidence from interviews with entrepreneurs analysts and policymakers whose assessments converge on the same point mini grid investments would be jeopardized in the event of central grid extension precisely because discoms would by regulatory order provide electricity services at highly subsidized rates well below their full economic cost our fieldwork suggests that the threat of central grid extension is a gateway barrier preventing mini grid development in india the issues associated with the gateway barrier have common elements with the so called holdup problem as identified in the economics of organizations there have been two recent federal policy guidelines and one actual state level policy addressing the regulatory status of mini grids we examine the effectiveness of these policies proposals in terms of an entrepreneur s willingness to develop mini grids in the future

political variables in cross country growth analysis the recent boom in cross country growth analysis has renewed the empirical interest in political sources of economic growth a large number of studies have tested political variables in growth regressions and a very heterogenous set of variables has been proposed to measure economically relevant differences in the political systems of countries this paper distinguishes five categories of relevant political variables democracy government stability political violence policy volatility and subjective perception of politics for each of these categories the specification testing method and results of the most relevant studies are presented and are critically discussed the paper concludes that measures of democracy are least successful and measures of policy volatility and subjective perception of politics most successful as explanatory variables in cross country growth regressions

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

the impact of shocks on gender differentiated asset dynamics in bangladesh abstractthis study investigates changes in assets owned by the household head his spouse or jointly in response to shocks in rural agricultural households in bangladesh with household survey panel data looking at changes within households over time we find that weather shocks adversely affect the asset holdings of household heads relatively strongly while predicted negative shocks more strongly lead to assets of both spouses being drawn down the results furthermore suggest that jointly owned assets are not easily sold in response to shocks and that women s asset holdings and coping strategies are shaped by their lower involvement in agriculture