capital controls and monetary policy in sudden stop economies abstract the dangers of high capital flow volatility and sudden stops have led economists to promote the use of capital controls as an addition to monetary policy in emerging market economies this paper studies the benefits of capital controls and monetary policy in a small open economy with financial frictions nominal rigidities and sudden stops without commitment the optimal monetary policy should sharply diverge from price stability the policymakers will also tax capital inflows in a crisis but such taxes may be welfare reducing with commitment capital controls involve a mix of current capital inflow taxes and future capital flow subsidies the optimal policy will never involve macro prudential capital inflow taxes or a departure from price stability whether or not commitment is available

why are there still so many jobs the history and future of workplace automation in this essay i begin by identifying the reasons that automation has not wiped out a majority of jobs over the decades and centuries automation does indeed substitute for labor as it is typically intended to do however automation also complements labor raises output in ways that leads to higher demand for labor and interacts with adjustments in labor supply journalists and even expert commentators tend to overstate the extent of machine substitution for human labor and ignore the strong complementarities between automation and labor that increase productivity raise earnings and augment demand for labor changes in technology do alter the types of jobs available and what those jobs pay in the last few decades one noticeable change has been a polarization of the labor market in which wage gains went disproportionately to those at the top and at the bottom of the income and skill distribution not to those in the middle however i also argue this polarization is unlikely to continue very far into future the final section of this paper reflects on how recent and future advances in artificial intelligence and robotics should shape our thinking about the likely trajectory of occupational change and employment growth i argue that the interplay between machine and human comparative advantage allows computers to substitute for workers in performing routine codifiable tasks while amplifying the comparative advantage of workers in supplying problem solving skills adaptability and creativity

learning about a new technology pineapple in ghana this paper investigates the role of social learning in the diffusion of a new agri cultural technology in ghana we use unique data on farmers communication patterns to define each individual s information neighborhood conditional on many potentially confounding variables we find evidence that farmers adjust their inputs to align with those of their information neighbors who were surpris ingly successful in previous periods the relationship of these input adjustments to experience further indicates the presence of social learning in addition applying the same method to input choices for another crop of known technol ogy correctly indicates an absence of social learning effects jel d83 013 033 q16

will digital technologies transform agriculture in developing countries mobile phones and the internet have significantly affected practically all sectors of the economy and agriculture is no exception building on a recent world bank flagship report this article introduces a concise framework for describing the main benefits from new information and communication technologies they promote greater inclusion in the broader economy raise efficiency by complementing other production factors and foster innovation by dramatically reducing transaction costs the article reviews the recent literature on corresponding technology impacts in the rural sector in developing countries digital technologies overcome information problems that hinder market access for many small scale farmers increase knowledge through new ways of providing extension services and they provide novel ways for improving agricultural supply chain management while there are many promising examples of positive impacts on rural livelihoods or digital dividends these have often not scaled up to the extent expected the main reason is that technology can always only address some but not all of the barriers faced by farmers in poorer countries

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

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

monetary policy and exchange rate volatility in a small open economy we lay out a small open economy version of the calvo sticky price model and show how the equilibrium dynamics can be reduced to a simple representation in domestic inflation and the output gap we use the resulting framework to analyse the macroeconomic implications of three alternative rulebased policy regimes for the small open economy domestic inflation and cpi based taylor rules and an exchange rate peg we show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail we also discuss a special case for which domestic inflation targeting constitutes the optimal policy and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules

prices rise faster than they fall output prices tend to respond faster to input increases than to decreases this tendency is found in more than two of every three markets examined it is found as frequently in producer goods markets as in consumer goods markets in both kinds of markets the asymmetric response to cost shocks is substantial and durable on average the immediate response to a positive cost shock is at least twice the response to a negative shock and that difference is sustained for at least five to eight months unlike past studies which documented similar asymmetries in selected markets gasoline agricultural products etc this one uses large samples of diverse products 77 consumer and 165 producer goods accordingly the results suggest a gap in an essential part of economic theory as a start on filling this gap the study finds no asymmetry in the resonse of an individual decision maker a supermarket chain to its costs but it finds above average asymmetry where a cost shock is filtered through a fragmented w

classifying exchange rate regimes deeds vs words abstract most of the empirical literature on exchange rate regimes uses the imf de jure classification based on the regime announced by the governments despite the recognized inconsistencies between reported and actual policies in many cases to address this problem we construct a de facto classification based on data on exchange rates and international reserves from all imf reporting countries over the period 1974 2000 which we believe provides a meaningful alternative for future empirical work on the topic the classification sheds new light on several stylized facts previously reported in the literature in particular we find that the de facto pegs have remained stable throughout the last decade although an increasing number of them shy away from an explicit commitment to a fixed regime hidden pegs we confirm the hollowing out hypothesis but show that it does not apply to countries with limited access to capital markets we also find that pure floats are associated with only relatively minor nominal exchange rate volatility and that the recent increase in the number of de jure floats goes hand in hand with an increase in the number of de facto dirty floats fear of floating

the digital provide information technology market performance and welfare in the south indian fisheries sector when information is limited or costly agents are unable to engage in optimal arbitrage excess price dispersion across markets can arise and goods may not be allocated efficiently in this setting information technologies may improve market performance and increase welfare between 1997 and 2001 mobile phone service was introduced throughout kerala a state in india with a large fishing industry using microlevel survey data we show that the adoption of mobile phones by fishermen and wholesalers was associated with a dramatic reduction in price dispersion the complete elimination of waste and near perfect adherence to the law of one price both consumer and producer welfare increased

optimal investment in transportation infrastructure when middlemen have market power a developing country analysis transportation costs and buyer market power reduce prices and income received by farmers in developing countries transportation costs directly affect the marketing margin and also exacerbate market power by limiting farmers access to buyers this article develops a multistage spatial model to determine optimal investment in transportation improvements taking account of impacts on marketing costs and competition the beneficial impact of investments from farmers perspective is mainly through enhanced competition meaning significant under investment may occur if this effect is ignored however the optimal investment depends on the relative importance of transportation costs in some settings transportation improvements reduce farm prices because buyers rationally over compensate farmers for these costs

collateral requirements and asset prices many assets derive their value not only from future cash flows but also from their ability to serve as collateral in this article we investigate this collateral premium and its impact on asset returns in an infinite horizon general equilibrium model with heterogeneous agents we document that borrowing against collateral substantially increases the return volatility of long lived assets moreover otherwise identical assets with different degrees of collateralizability exhibit substantially different return dynamics because their prices contain a sizable collateral premium that varies over time this premium can be positive even for assets that never pay dividends

lessons about markets from the internet many of us have grown used to tired of and finally downright skeptical of claims of the transformative powers of the internet it was to usher in the new economy but we seem mostly to have the old it would transform retail but toys r us has outlasted etoys frictionless commerce would be the norm but plenty of friction still exists the internet was also claimed to require a whole new economics with all new laws while this too was very far from the truth existing theories have mostly done quite well the internet has had a substantial effect on economic thought in this paper we discuss some ways in which the internet has affected how economists think about markets

learning by doing and learning from others human capital and technical change in agriculture household level panel data from a nationally representative sample of rural indian households describing the adoption and profitability of high yielding seed varieties hyvs associated with the green revolution are used to test the implications of a model incorporating learning by doing and learning spillovers the estimates indicate that i imperfect knowledge about the management of the new seeds was a significant barrier to adoption ii this barrier diminished as farmer experience with the new technologies increased iii own experience and neighbors experience with hyvs significantly increased hyv profitability and iv farmers do not fully incorporate the village returns to learning in making adoption decisions

the effect of inflation targeting and financial openness on currency composition of sovereign international debt abstract this paper analyzes the joint effect of inflation targeting and capital account openness in promoting changes to the currency composition of sovereign international debt in developing countries first using difference in differences in combination with entropy balancing we offer empirical evidence that the adoption of inflation targeting together with high capital account openness can significantly reduce the reliance on foreign currency denominated sovereign international debt we find that financially integrated inflation targeting countries have 11 percentage points lower foreign currency shares in their sovereign debt compared to non targeting countries second we determine the threshold level of financial openness that countries need to attain before they see the full benefits of inflation targeting third the joint effect of inflation targeting and capital account openness significantly increases three years after the policy implementation our results are robust to alternative specifications which include instrumental variables to account for the endogeneity of the policy

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

general equilibrium models and homotopy methods abstract our purpose is to argue the inevitable and lasting role which homotopy methods will play in both theoretical and applied economic analysis the essence of our position is that large equilibrium models are needed to anticipate adjustments in the economy following policy changes or shock events and that homotopy methods are needed to analyze these equilibrium models in addition to the computation of equilibria homotopy methods will play an important role in the study of multiplicity of equilibria t tonnement comparative statics and market instability

exchange rates and monetary policy in emerging market economies this paper investigates the effects of exchange rate regimes and alternative monetary policy rules for an emerging market economy that is subject to a volatile external environment in the form of shocks to world interest rates and the terms of trade in particular we highlight the impact of financial frictions and the degree of exchange rate pass through in determining the relative performance of alternative regimes in stabilizing the economy in the face of external shocks our results are quite sharp when exchange rate pass through is high a policy of non traded goods inflation targeting does best in stabilizing the economy and is better in welfare terms when exchange rate pass through is low however a policy of strict cpi inflation targeting is better in all cases a fixed exchange rate is undesirable in addition financial frictions have no implications for the ranking of alternative policy rules

optimal time consistent macroprudential policy collateral constraints widely used in models of financial crises feature a pecuniary externality agents do not internalize how borrowing decisions made in good times affect collateral prices during a crisis we show that under commitment the optimal financial regulator s plans are time inconsistent and study time consistent policy quantitatively this policy reduces sharply the frequency and magnitude of crises removes fat tails from the distribution of asset returns and increases social welfare in contrast constant debt taxes are ineffective and can be welfare reducing while an optimized macroprudential taylor rule is effective but less so than the optimal time consistent policy

spillover effects of capital controls on capital flows and financial risk contagion abstract this paper aims to explicitly investigate the multilateral effects of capital controls on capital flows and the risk contagion from global financial shocks to emerging market economies emes using a comprehensive portfolio allocation data set from epfr and a newly constructed high frequency similarity weighted average capital control swacc index of the rest of the world in 19 emes from 2001 to 2015 this paper then empirically explore the spillover effect of capital controls on capital flow and capital price co movement we find that swacc is positively associated with the global fund s portfolio weight allocated to a country the total portfolio flows into that country and the capital market co movement between that country and the advanced countries further analysis shows that these impacts are more pronounced for capital inflow control or in extreme circumstances when capital flows are extremely high or low our results are robust to a variety of alternative measures regression designs and methods

how high are rates of return to fertilizer evidence from field experiments in kenya the idea that peasant farmers are rational profit maximizers has been a staple of development economics since theodore schultz 1964 it has also been influential in shaping policy for example agricultural experts have stressed the importance of fertilizer use in raising agricultural yields pointing to impressive results on experimental farms and to huge differences in agricultural productivity across countries with different levels of fertilizer use robert evenson and douglas gollin 2003 historically many countries subsidized fertilizer in response but economists have been skeptical of claims that farmers are leaving money on the table noting that fertilizer may not have the same returns on real world farms as on experimental farms that returns to fertilizer may be low for many farmers even if they are high on average tavneet suri 2007 that fertilizer may require complementary inputs or may be risky many countries have withdrawn or scaled back fertilizer psychology and development theory and experimental evidence

a theory of capital controls as dynamic terms of trade manipulation we develop a theory of capital controls as dynamic terms of trade manipulation we study an infinite horizon endowment economy with two countries one country chooses taxes on international capital flows in order to maximize the welfare of its representative agent while the other country is passive we show that a country growing faster than the rest of the world has incentives to promote domestic savings by taxing capital inflows or subsidizing capital outflows although our theory of capital controls emphasizes interest rate manipulation the pattern of borrowing and lending per se is irrelevant

ict and agricultural productivity evidence from cross country data this article carries out agricultural production function estimations based on data for the period 1995 2000 on 81 countries to present empirical evidence on the relationship between the adoption of information and communication technology ict and agricultural productivity it is found that new ict has a significantly positive impact on agricultural productivity the evidence suggests that the adoption of modern industrial inputs in agricultural production relies on the information and communication infrastructure however the empirical evidence from this study also suggests that new ict could be a factor for the divergence between countries in terms of overall agricultural productivity not only do we find that the ict adoption levels of the richer countries are much higher than those of the poorer countries but also that returns from ict in agricultural production of the richer countries are about two times higher than those of the poorer countries a plausible explanation for the poorer countries relatively low productivity elasticity of ict is the lack of important complementary factors such as a substantial base of human capital

incomplete pass through and the welfare effects of exchange rate variability abstract this paper considers the implications of incomplete exchange rate pass through for optimal monetary and exchange rate policy a two country model is presented which allows an explicit derivation of welfare functions in terms of a weighted sum of the second moments of producer prices and the nominal exchange rate from a single country perspective the optimal exchange rate variance depends on the degree of pass through the size and openness of the economy the elasticity of labour supply and the volatility of foreign producer prices welfare may be decreasing or increasing in the volatility of the exchange rate

financial crises and exchange rate policy this paper studies exchange rate policy in a small open economy model featuring an occasionally binding collateral constraint and fisherian deation the goal is to evaluate the performance of alternative exchange rate policies in sudden stop prone economies the key element of the analysis is a pecuniary externality arising from frictions in the international credit markets which creates a trade o between price

why do emerging economies borrow short term the authors argue that emerging economies borrow short term due to the high risk premium charged by international capital markets on long term debt they first present a model where the debt maturity structure is the outcome of a risk sharing problem between the government and bondholders by issuing long term debt the government lowers the probability of a liquidity crisis transferring risk to bondholders in equilibrium this risk is reflected in a higher risk premium and borrowing cost therefore the government faces a tradeoff between safer long term borrowing and cheaper short term debt second the authors construct a new database of sovereign bond prices and issuance they show that emerging economies pay a positive term premium a higher risk premium on long term bonds than on short term bonds during crises the term premium increases with issuance shifting toward shorter maturities this suggests that changes in bondholders risk aversion are important to understand emerging market crises

the new institutional economics and development theory a brief critical assessment abstract in this paper we discuss strengths and weaknesses of transaction cost and imperfect information approaches to the economic theory of institutions particularly with reference to problems relevant to economic development

getting prices right the impact of the market information service in uganda the market information service project in uganda collected data on prices for the main agricultural commodities in major market centers and disseminated the information through local fmradio stations in various districts exploiting the variation across space between households with and without access to a radio we find evidence suggesting that better informed farmers managed to bargain for higher farm gate prices on their surplus production

optimal fiscal and monetary policy with sticky prices in this paper i consider the role of state contingent inflation as a fiscal shock absorber in an economy with nominal rigidities i study the ramsey equilibrium in a monetary model with distortionary taxation nominal non state contingent debt and sticky prices with sticky prices the ramsey planner must balance the shock absorbing benefits of state contingent inflation against the associated resource misallocation costs for government spending processes resembling post war experience introducing sticky prices generates striking departures in optimal policy from the case with flexible prices for even small degrees of price rigidity optimal policy displays very little volatility in inflation tax rates display greater volatility compared to the model with flexible prices with sticky prices tax rates and real government debt exhibit behavior similar to a random walk for government spending processes resembling periods of intermittent war and peace optimal policy displays extreme inflation volatility even when the degree of price rigidity is large as the variability in government spending increases smoothing tax distortions across states of nature becomes increasingly important and the shock absorber role of inflation is accentuated

the drivers of financial globalization over the past decade emerging markets have accounted for a growing fraction of world gdp and international trade reflecting fast growth in china and india but also strong economic performance across the board and the spec tacular increase in foreign exchange reserve holdings the growing importance of sovereign wealth funds and the pattern of global imbal ances more generally suggest that these coun tries are also playing a major role in financial globalization

risk sharing and transactions costs evidence from kenya s mobile money revolution we explore the impact of reduced transaction costs on risk sharing by estimating the effects of a mobile money innovation on consumption in our panel sample adoption of the innovation increased from 43 to 70 percent we find that while shocks reduce consumption by 7 percent for nonusers the consumption of user households is unaffected the mechanisms underlying these consumption effects are increases in remittances received and the diversity of senders we report robustness checks supporting these results and use the four fold expansion of the mobile money agent network as a source of exogenous variation in access to the innovation jel e42 g22 o16 o17 z13 in developing countries informal networks provide an important means by which individuals and households share risk though the insurance they provide is often incomplete economists have proposed a number of reasons for this incompleteness including information asymmetries which manifest in problems of moral hazard and limited commitment both of which induce positive correlations between realized income and consumption in this article we emphasize a complementary source of incompleteness transaction costs literally the costs of transferring resources between individuals we test the impact of transaction costs on risk sharing by analyzing data from a large panel household survey that we designed and administered in kenya over a three year period to capture the expansion of mobile money this financial innovation has allowed individuals to transfer purchasing power by simple short messaging service sms technology and has dramatically reduced the cost of sending money across large distances mobile money is a recent innovation in developing economies one of the first and most successful examples to date is kenya s m pesa 1 in just four years after its