mexico and the brady plan mexico has throughout the 1980s been centre stage in the debates and events shaping the sovereign debt problem caught between a sudden collapse of its terms of trade and rising world interest rates mexico suspended debt service payments in august 1982 and ushered in what has since become known as the debt crisis in the following years lending to ldcs dried up and debtor countries were increasingly forced to run high trade surpluses to effect ever growing transfers from poor back to rich countries in the face of falling growth rates and rising inflation in the high debt countries then secretary of the treasury baker proposed the baker plan in return for economic reforms high debt countries would get new access to medium term new loans in addition to rolling over of amortization of old loans new loans had to come both from commercial creditors and the official lending institutions with access to capital markets restored the economic reforms would it was hoped allow the debtors to grow out of debt but experience in the high debt countries showed that the original hopes of the proponents of the baker plan went unfulfilled net transfers out of the borrowing countries went up rather than down as

environmental policy intra industry trade and transfrontier pollution the paper discusses effects of domestic environmental policy on foreignemissions and on transboundary pollution we use a dixit stiglitz typemodel of monopolistic competition with an endogenous number of firms production generates environmental externalities which spill over to theother country it is shown that environmental policy has an impact onmarket structure at home and abroad these market structure effectsinduce changes in emissions abroad in contrast to what has been derivedin earlier contributions it turns out to be possible that tighterenvironmental standards at home lead to less emissions abroad the paperderives these results and provides the economic intuition behind them finally conditions for optimal environmental policies are derived

status in markets this project tests for the effect of social status in a laboratory experimental market we consider a special box design market in which a vertical overlap in supply and demand ensure that there are multiple equilibrium prices we manipulate the relative social status of our subjects by awarding high status to a subset of the group based on one of two procedures in the first a subject s score on a trivia quiz determines his or her status in another subjects are assigned randomly to a higher status or lower status group in both treatments we find that average prices are higher in markets where higher status sellers face lowerstatus buyers and lower when buyers have higher status than sellers across all sessions the higher status side of the market captures a greater share of the surplus earning significantly more than their lower status counterparts

national price levels purchasing power parity and cointegration a test of four high inflation economies abstract the time series properties of exchange rates and wholesale prices from four high inflation countries show some evidence in support of purchasing power parity tests for stationarity of real exchange rates and cointegration among price and exchange rate variables are presented for argentina brazil chile and israel during the 1970s and 1980s error correction models describe the mechanism of adjustment to long run equilibrium

impacts of eu carbon emission trade directive on energy intensive industries indicative micro economic analyses the cost impacts from the european emission trading system ets on energy intensive manufacturing industries have been investigated the effects consist of direct costs associated to the co2 reduction requirements stated in the eu directive and of indirect costs of comparable magnitude that originate from a higher electricity price triggered by the ets in the power sector the total cost impacts remain below 2 of the production value for most industries within the ets in the kyoto period in the post kyoto phase assuming a 30 co2 reduction the total cost impact may raise up to 8 of production value in the heaviest industry sectors in steel and cement industries the cost impacts are 3 4 fold compared to the least affected pulp and paper and oil refining electricity intensive industries outside the ets will also be affected for example in aluminum and chlorine production the indirect cost impacts from ets could come up to 10 of production value already in the kyoto period as industry sectors are affected differently by the ets some correcting mechanisms may be worthwhile to consider in securing the operation of the most electricity intensive sectors e g balancing taxation schemes that may include as income source a levy on the wind fall profits of the power sector due to ets a future improvement in ets for industries within the scheme could be scaling of the emission reduction requirement so that the relative total emission reduction costs are at about the same level

regulation factor rewards and international trade this paper develops an approach for incorporating regulation into the theory of production distribution and trade using environmental regulation as an example four major conclusions emerge in the course of the analysis 1 production process regulation is equivalent in its effect on other cooperating factors to neutral technical regress i e negative progress 2 specific unambiguous income redistribution consequences follow from such regulation if commodity prices are held constant the factor used relatively intensively in the non regulated industry will gain absolutely in terms of both goods 3 unilateral or uncoordinated regulation destroys the link between uniform world commod ity prices and identical factor proportions factors prices across trading countries or regions 4 if any factor of production is freely mobile across frontiers the least differential regulation as between countries will entirely drive out the regulated industry from the more to the less regulated economy

international trade and environmental quality a survey abstract international trade has been incorporating various aspects of environmental issues since 1970 the extent to which environmental problems might affect many facets of trade or vice versa has been the subject of considerable debate over these years in this article we have attempted to establish some of the links between international trade and environmental quality by performing a comprehensive literature review we discuss issues such as establishing direct and indirect effects of international trade on environmental quality effects of trade on economic development environmental quality and energy and their relation with each other and finally the role of governments and international organizations in this context studies have so far revealed some linkages between trade and environment through conventional trade theory however interactions between international trade and types of pollution their sink and assimilative capacity need to be analyzed using a general equilibrium approach currently very little knowledge and agreement on the nature of interactions between trade theories development process and environmental quality exist existing studies have shown that the structure of environmental regulations should be modified to reflect the existence of trade under imperfect competition therefore further research on the interaction between new trade theory and environmental regulation is needed also theoretical and quantitative analysis regarding the effects of environmental regulations on competitiveness and location decision is needed the intensity and type of environmental measures vary across issues and countries therefore harmonizing environmental measures creates an inefficient atmosphere and to assume that trade restrictions will either improve or reverse the environmental damages is a serious mistake given the dynamic and intricate nature of the problem trade and environment debate continues despite vast research and poses a challenge for researchers and policy makers in the foreseeable future

mexico stabilization debt and growth mexico rudiger dornbusch mexico today is at a crossroads as the de la madrid presidency which has been dominated by the debt crisis comes to an end a number of major policy difficulties remain inflation is still a problem and the continuation of stagnation in a country where the population grows by 3 a year is clearly unsustainable the outlook for inflation is dependent on the government s ability to keep its budget under control the stabilization programme has been quite successful in this respect but the cost in terms of foregone growth is staggering the issue here is how to collect the disinflation benefits of policy restraint analysing the peculiar process of rapid inflation both in mexico and elsewhere the author calls for an incomes policy as for growth it is closely linked to the external situation mexico which triggered the debt crisis in 1982 has made remarkable progress in achieving a non interest current account surplus yet its external debt remains huge and requires a continuation of net transfers abroad the experience though is that debt service comes at the expense of productive investment and growth the author proposes to escape from the unacceptable choice between debt service and growth by adopting what he calls interest rescheduling a debt equity swap applied to interest payments rather than to the principal

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

two crises inflationary inertia and credibility this paper provides a comparative analysis of the mexican currency crisis of 1994 and the chilean crisis of 1982 to assess to what extent exchange rate based stabilisation programmes are successful in reducing or even eliminating inflationary inertia the paper provides a brief overview of the chilean and mexican reform and stabilisation programmes a theoretical model that emphasises the role of credibility is developed to analyse the effects of exchange rate based stabilisation programmes on inflationary inertia according to the model less than credible stabilisations will not eliminate inertia and will generate major real exchange rate overvaluation detailed data are used to test the hypothesis

the enlargement of the european union effects on trade and emissions of greenhouse gases abstract with the gradual accession of various central and eastern european countries ceecs to the european union eu international trade between the eu and the ceecs will change as a result of trade liberalisation and the mobility of production factors within the eu the eu and most of the ceecs have already committed themselves to reduce by 2008 2012 their emissions of greenhouse gases ghgs by 8 compared to the 1990 level this paper reports on an investigation of the potential consequences of the enlargement of the eu and of the emission reduction target set by the kyoto protocol on the sectoral production patterns and international trade a comparative static general equilibrium model was developed to examine the impacts under different scenarios for illustrative purposes two regions the eu and the ceecs and three categories of goods and services agricultural goods industrial goods and services were included the model was calibrated by the 1998 data the model was subsequently applied to study the effects of free trade the mobility of factors and the environmental constraints on production and international trade in light of the enlargement of the eu we show that in this specific context free trade is beneficial to economic welfare and does not necessarily increase emissions of greenhouse gases the mobility of factors also increases economic welfare but in the case of fixed production technology it may harm the environment through more emissions of ghgs

trend stationary of inflation rates evidence from lm unit root testing with a long span of historical data the article applies the lm univariate unit root test recently developed by lee and strazicich 2003 2004 to re examine the validity of trend stationary in the inflation rates of 11 oecd and asian countries using a longer span of historical data our empirical findings are favourable to the trend stationary of the inflation rates when we control the structural breaks in series and therefore they point to the absence of hyperinflation in the majority of the countries the results indicate that shocks to inflation rates are temporary and soon converge with the inflation rates being trend stationary hence most structural breaks in the inflation rate occur around the great depression world war i world war ii and energy shock periods for the convergence effect we repeat the unit root tests utilized above for smaller sub samples so as to provide a robust analysis the outcomes show that by selecting a longer data span we can catch more powerful convergent evidence overall some policy implications a

adjustment and social costs in chile during the 1980s abstract traditional analysis of adjustment programs tends to underestimate the welfare costs because it assumes that a contraction of nontradable production will close the expenditure income gap while the resulting excess supply of tradables will automatically be exported in chile however tradable output contracted sharply falling almost two thirds as much as nontradable output the conventional analysis also ignores the effect of adjustment on unemployment rates and on real wages this paper argues that the adjustment measures of the 1980s were regressive even though the government was successful in targeting its expenditures toward the very poor during the period of fiscal retrenchment among the regressive adjustment measures were the subsidies to holders of dollar denominated debt provided by the central bank in addition policies to reduce expenditures raised the unemployment rate over 26 reduced real wages by 20 for almost five years and reduced health housing and education budgets by 20 per capita finally the required real devaluation raised the cost of living for the poor

economic crisis adjustment and living standards in mexico 1982 85 abstract this paper presents an estimate of the impact of economic crisis and adjustment on the living standards of the mexican population between 1982 and 1985 the analysis is based on information on wage and nonwage incomes unemployment functional income distribution changes in public expenditures and social indicators the specific questions addressed are what happened to agricultural and nonagricultural wage and nonwage incomes how did unemployment and the composition of employment change what was the impact of fiscal cuts on social expenditures and food subsidies were social services affected by declining resources did social indicators worsen in addition households strategies in response to declining incomes are briefly discussed finally conjectures are made regarding which population groups were hurt most by the crisis the results indicate that the crisis and adjustment process left mexico with a relatively impoverished middle class and with rising poverty

inward looking policies institutions autocrats and economic growth in latin america an empirical exploration this paper explores the institutionaldeterminants of economic growth in latinamerica by taking advantage of recentempirical research that employs subjectiveand objective measures to test for apossible northian explanation that linksinstitutional quality and economic growth we explore a simple framework that may helpbetter understand the policymakers choicesand persistence regarding inward lookingpolicies that were pursued between the1930s and the 1980s by arguing that in thelatin american case olson s 1982 idea ofencompassing interest should be expanded tocover not only the economic stakes of powerholders but in particular their psychicincome which includes their politicalstakes along the lines of recent work byrobinson 1997 coyne 2002 andothers

mexico s investment collapse debt or oil abstract this paper tests three explanations for mexico s investment collapse in the early 1980s the oil price decline the termination of capital inflows and debt overhang uncertainty effects using previously ignored investment data on private sector industries the data consistently point to the importance of the rise in the relative price of investment goods driven in large part by falling world oil prices but the data also allow a role for the termination of capital inflows however after controlling for these effects the paper finds little evidence for debt overhang effects heightened uncertainty or other commonly cited explanations in the literature jel f34

mexico s balance of payments crisis a chronicle of a death foretold this paper claims that the roots of mexico s balance of payments crisis are found in the prevailing high degree of capital mobility and financial globalization under these circumstances shifts in foreign capital flows and anticipation of a banking system bailout may produce large imbalances between stocks of financial assets and foreign reserves threatening the sustainability of currency pegs econometric analysis suggests that half of mexico s reserve losses could be accounted for by these phenomena large financial imbalances are also fertile ground for self fulfilling prophesy crises which lead devaluations to produce deep recessions these difficulties can be partly remedied by appropriate policies

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

economic and environmental implications of turkish accession to the european union a cge analysis abstract the purpose of this paper is to analyze the economic and environmental implications of turkey s possible accession to the european union eu the paper focuses on the impacts of three main components of turkey s possible eu membership i the free movement of labor between the eu and turkey ii the free movement of capital and iii the burden sharing of turkey in terms of the eu s environmental objectives in the horizon of 2020 that is the reduction of carbon emissions among these a particular focus is placed on the influence of the co 2 emission reduction targets in both regions and their consequences on the carbon price in 2020 we estimate the resource allocation effects of eu climate change policies on both regions by taking into account the likely labor movement from turkey to the eu and capital movement in the reverse direction the results show that different emission targets for the two regions bring about a change in comparative advantages and thus a change in interregional competitiveness

monetary and exchange rate arrangements for nafta abstract this paper considers the extent to which the north american free trade area nafta meets the criteria for a common currency area nafta is compared with the ec a regional grouping for which initial plans for a monetary union are already in place most of the anticipated benefits from a monetary union in the ec apply with equal force to nafta however because the underlying disturbances are more diverse across members of nafta the costs of abandoning the exchange rate instrument are likely to be higher this is particularly true when nafta is compared to the ec s continental core

financial crises and balance of payments crises a simple model of the southern cone experience abstract this paper starts from a simple model of the domestic banking sector and develops the potentially destabilizing macroeconomic consequences of its role in intermediating foreign capital inflows both financial and balance of payments crises may result reminiscent of the southern cone experience

the dynamics of inflation a study of a large number of countries over the last twenty years the statistical properties of inflation persistence has been the subject of intense investigation and debate without reaching a unanimous conclusion yet in this article we attempt to shed further light to this debate using a battery of econometric techniques in order to provide robust evidence on the degree of inflation persistence and whether this has changed during the period in which several countries have followed inflation targeting regimes or new monetary regimes we consider the inflation rates of thirty developed and emerging economies using quarterly data for the period 1958 to 2007 which include alternative monetary policy regimes the coefficient of the inflation parameter is estimated by ordinary least squares ols autoregressive moving average arma and autoregressive fractionally integrated moving average arfima models furthermore the grid bootstrap median unbiased mub estimator approach developed by hansen 1999 is used to estimate the finite sample ols

the impact of selected abatement strategies on transnational pollution the terms of trade and factor rewards a general equilibrium approach abstract widespread publicity of international conflict over transfrontier pollutants such as acid deposition and the november 1986 chemical spill in the rhine river has increased the public s awareness of the need to devise abatement strategies appropriate for transnational pollution this article develops a general equilibrium approach for analyzing the economic impacts of selected abatement strategies the model includes internationally mobile goods capital and pollution flows and flexible output and factor prices the general equilibrium approach provides policymakers with important information which is usually not revealed by a partial equilibrium approach that is demonstrated by applying the model to the north american acid deposition issue

from personalized exchange towards anonymous trade a field experiment on the workings of the invisible hand abstract the experimental literature has shown the tendency for experimental trading markets to converge to neoclassical predictions yet the extent to which theory explains the equilibrating forces in markets remains under researched especially in the developing world we set up a laboratory in 94 villages in rural sierra leone to mimic a real market we implement several treatments varying trading partners and the anonymity of trading we find that when trading with co villagers average efficiency is somewhat lower than predicted by theory and observed in different contexts and markets do not fully converge to theoretical predictions across rounds of trading when participants trade with strangers efficiency is reduced more anonymizing trade within the village does not affect efficiency this points to the importance of behavioral norms for trade intra village social relationships or hierarchies instead appear less important as determinants of trading outcomes this is confirmed by analysis of the trader level data showing that individual earnings in the experiment do not vary with one s status or position in local networks

persistent parochialism trust and exclusion in ethnic networks decentralized groups such as close knit residential neighborhoods and ethnically linked businesses often achieve high levels of cooperation while engaging in exclusionary practices that we call parochialism we investigate the contribution of within group cultural affinity to the ability of parochial groups to cooperate in social dilemmas we analyze parochial networks in which the losses incurred by not trading with outsiders are offset by an enhanced ability to enforce informal contracts by fostering trust among insiders we show that there is a range of degrees of parochialism for which parochial networks can coexist with an anonymous market offering unrestricted trading opportunities

the distribution of income shocks during crises an application of quantile analysis to mexico 1992 95 moving beyond the simple comparisons of averages typical of most analyses of household income shocks this article employs quantile analysis to generate a complete distribution of such shocks by type of household during the 1995 crisis in mexico it compares the distributions across normal and crisis periods to see whether observed differences were due to the crisis or are intrinsic to the household types alternatively it asks whether the distribution of shocks during normal periods was a reasonable predictor of vulnerability to income shocks during crises it finds large differences in the distribution of shocks by household types both before and during the crisis but little change in their relative positions during the crisis the impact appears to have been spread fairly evenly households headed by people with less education poor single mothers or people working in the informal sector do not appear to experience disproportionate income drops either in normal times or during crises

trade and the environment from a southern perspective the relationship between free trade and the environment is one of the main issues of contention between environmental and ecological economics environmental economics assumes a positive relationship between free trade economic growth and environmental policies environmental externalities may cause important damage however trade is not to be blamed for this instead the fault lies with policy inadequacies at the national level on the other hand some ecological economists criticise the assumptions of environmental economics especially the immobility of production factors and the positive correlation between income and environmental quality they plead for measures to prevent deterioration of northern environmental standards in a race to the bottom due to ecological dumping from the south in this paper we argue that neither environmental economics nor northern ecological economics take into account the structural conditions determining the international trade system based on some new empirical evidence on material flows we stress the notion of environmental cost shifting if physical and political ecology perspectives are adopted a southern approach to the trade and environment issue may arise 2001 elsevier science b v all rights reserved

banks and macroeconomic disturbances under predetermined exchange rates abstract as the recent mexican crisis vividly illustrates latin american countries often go through boom bust cycles caused by both domestic policies and external shocks such cycles are typically magnified by weak banking systems which intermediate large capital inflows this paper develops a simple optimizing model to analyze how the banking sector affects the propagation of shocks in particular we show how the world business cycle and shocks to the banking system affect output and employment through fluctuations in bank credit we also analyze the countercyclical use of reserve requirements econometric evidence for chile and mexico supports the main predictions of the model

the effect of environmental taxes on the volume of international trade abstract this paper is a response to ropke s 1994 question whether environmental taxes increase or decrease the volume of international trade using a three country heckscher ohlin samuelson model it is shown that the effect can be in either direction in the absence of pollution haven and three country effects that reverse natural comparative advantage environmental taxes decrease increase the volume of trade between any two countries when the tax is larger in the country that exports imports the pollutive good the environmental tax can also generate strong trade effects between two of the countries changing production costs and thereby reversing the expected tax effect on a third country the effects on trade are likely to be smaller when comparable pollution damage is global rather than local

historical property rights sociality and the emergence of impersonal exchange in long distance trade this laboratory experiment explores the extent to which impersonal exchange emerges from personal exchange with opportunities for long distance trade we design a three commodity production and exchange economy in which agents in three geographically separated villages must develop multilateral exchange networks to import a good only available abroad for treatments we induce two distinct institutional histories to investigate how past experience with prop erty rights affects the evolution of specialization and exchange we find that a history of unenforced property rights hinders our subjects ability to develop the requisite personal social arrangements to support specialization and effec tively exploit impersonal long distance trade jel c90 d23 d5 p 4

the distribution of income shocks during crises moving beyond the simple comparisons of averages typical of most analyses of household income shocks this article employs quantile analysis to generate a complete distribution of such shocks by type of household during the 1995 crisis in mexico it compares the distributions across normal and crisis periods to see whether observed differences were due to the crisis or are intrinsic to the household types alternatively it asks whether the distribution of shocks during normal periods was a reasonable predictor of vulnerability to income shocks during crises it finds large differences in the distribution of shocks by household types both before and during the crisis but little change in their relative positions during the crisis the impact appears to have been spread fairly evenly households headed by people with less education poor single mothers or people working in the informal sector do not appear to experience disproportionate income drops either in normal times or during crises

domestic currency appreciation and foreign capital inflows what comes first chile 1977 1982 abstract the purpose of this paper is to find granger causality relations between the real exchange rate the inflow of foreign capital interest rate arbitrage and the terms of trade in a representative indebted developing country chile this is done for a time period in which chile went from an unprecedented expansion 1977 1981 to a severe recession 1982 the paper confronts two competing hypotheses that purport to explain such behavior hypothesis one claims that causality went from the real exchange rate affected by nominal exchange rate policy to capital inflows in what could be termed a current account deficit induced demand for foreign funds hypothesis two posits a causality that ran the other way from capital inflows to the real exchange rate in which case the exogenous inflows of foreign money implied a current account deficit special attention is paid to the role played by two other related factors interest rate arbitrage and terms of trade variations by applying innovation accounting techniques based on estimated vector autoregressions support is found for the second of these hypotheses thus the real issue in chile and in many other currently indebted latin american countries should be the timing and extent of the capital account liberalization process carried out during the period

the pricing of manufactured goods during trade liberalization evidence from chile israel and korea this paper is an investigation of price setting behavior in chile israel and korea when each of these countries moved from a fairly closed to a more open international trade regime in some cases the intensification of the opening resulted from real appreciation rather than from a formal adjustment in tariff rates as in chile 1980 82 and israel 1983 84 the central thesis of this paper is that the structural price equation for import competing manufactured goods changes with the degree of openness to trade when the economy is fairly closed the main weight is commanded by domestic cost variables and excess demand and foreign prices only affect pricing through their effects on imported material prices during trade liberalization the rate of change of prices of an increasing proportion of manufacturing goods begins to be influenced by the landed cost of similar imports but domestic variables still have a role because selected domestic manufactured goods are considered imperfect substitutes for internationally traded products empirical results from time varying parameter estimation show that domestic currency prices of imports become progressively more important during the liberalization processes in the three countries

targeting the real exchange rate theory and evidence abstract this paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate an intertemporal optimizing model suggests that in the absence of changes in fiscal policy a more depreciated level of the real exchange rate can only be attained temporarily this can be achieved by means of higher inflation and or higher real interest rates depending on the degree of capital mobility evidence for brazil chile and colombia supports the model s prediction that undervalued real exchange rates are associated with higher inflation

debt relief growth and price stability in mexico inspired by the negotiation of the foreign debt of mexico in 1989 this paper provides a framework to show that prior to debt relief an ldc government which is indebted both domestically and externally has an additional incentive not to default on its external obligations however repayment of the external debt is shown to involve a delicate tradeoff between growth and inflation on the one hand the government increases its ability to keep domestic interest rates relatively low thereby promoting investment and growth on the other hand the government worsens the budget deficit problem thereby introducing additional inflationary pressures the way to improve this tradeoff is by negotiating a debt relief operation on the foreign debt

international trade and environmental regulation time series evidence and cross section test this paper examines empiricallywhether more stringent domestic environmental policiesreduce the international competitiveness ofenvironmentally sensitive goods esgs our timeseries evidence indicates that there are no systematicchanges in trade patterns of esgs in the last threedecades despite the introduction of more stringentenvironmental regulations in most of the developedcountries in the 1970s and 1980s this observedphenomenon is then subjected to a multi countryeconometric test using an extended gravity equationframework the test suggests that overall morestringent environmental regulations do not reducetotal exports exports of esgs and exports ofnon resource based esgs neither was there anyevidence to support the hypothesis that new tradebarriers emerge to offset the effects of morestringent environmental regulations

trade spatial separation and the environment we develop a simple two sector dynamic model to show how pollution can provide a motive for trade by spatially separating incompatible industries we assume that the production of smokestack manufactures generates pollution which lowers the prod uctivity of an environmentally sensitive sector farming two identical unregulated countries will gain from trade if the share of world income spent on smokestack goods is high in contrast when the share of world income spent on the dirty good is low trade can usher in a negatively reinforcing process of environmental degradation and real income loss for the exporter of smokestack goods 1999 elsevier science b v all rights reserved

the terms of trade the real exchange rate and economic fluctuations this paper examines the relationship between terms of trade and business cycles using a three sector intertemporal equilibrium model and a large multicountry database results show that terms of trade shocks account for nearly one half of actual gdp variability the model explains weak correlations between net exports and terms of trade the harberger laursen and metzler effect and produces large and weakly correlated deviations from purchasing power parity and real interest rate parity terms of trade shocks cause real appreciations and positive interest differentials although productivity shocks have opposite effects the puzzle that welfare gains of international asset trading are negligible is left unresolved copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

rational and self fulfilling balance of payments crises speculative attacks on a pegged exchange rate must sometimes occur ifasset price paths are to be free of abnormal profit opportunities suchattacks are fully rational as they reflect the market s response to aregime breakdown that is inevitable the authors shows that under someexpectations about policy balance of payments crises can also be purely self fulfilling events in such cases even a permanently viableregime may collapse and the economy will possess multiple equilibriacorresponding to different subjective assessments of the probability ofa crisis the behavior of the domestic interest rate will naturally reflect the possibility of a speculative attack copyright 1986 by american economic association

reconciling the conflict between the pollution haven hypothesis and an emerging trajectory of international technology transfer abstract many developing countries have relied on technology transfer through foreign direct investment fdi from developed countries as a primary means of technology acquisition however recent increased global eco consciousness and linking of trade and investment with environmental issues has the potential of disrupting these investment flows this paper investigates the validity of the pollution haven hypothesis which claims that an open market regime will encourage the flow of generally low technology polluting industries to developing countries from a neo technology trade perspective in the process an emerging trajectory of international technology transfer favoring high technology industries is established this paper concludes that positive measures enhancing fdi is not only crucial for technology upgrading but at the same time brings about enhanced environmental welfare through transfer of eco friendly products and production processes

the impact of social structure on economic outcomes s ocial structure especially in the form of social networks affects economic outcomes for three main reasons first social networks affect the flow and the quality of information much information is subtle nuanced and difficult to verify so actors do not believe impersonal sources and instead rely on people they know second social networks are an important source of reward and punishment since these are often magnified in their impact when coming from others personally known third trust by which i mean the confidence that others will do the right thing despite a clear balance of incentives to the contrary emerges if it does in the context of a social network economists have recently devoted considerable attention to the impact of social structure and networks on the economy for example see the economists chapters in rauch and casella 2001 and the illuminating review essay of this volume by zuckerman 2003 as well as dutta and jackson 2003 and calvoarmengol 2004 however i focus here on sociologists contributions sociologists have developed core principles about the interactions of social structure information ability to punish or reward and trust that frequently recur in their analyses of political economic and other institutions i begin by reviewing some of these principles building on these i then discuss how social structures and social networks can affect economic outcomes like hiring price productivity and innovation

testing capital account liberalization without forward rates another look at chile 1979 1982 abstract the paper offers a way to test the impact of capital account liberalization on domestic interest rates when proxies for expectations of depreciation are unavailable the model is tested on the well understood japanese experience in 1979 1980 and then applied to the chilean liberalization from 1979 1982 the evidence points to chilean monetary authorities retaining significant control over interest rates across the period and offers support to an evolving interpretation of the period that stresses the excessive optimism about the reforms rather than their lack of credibility as the source of their ultimate collapse

oil dependency and exchange rate regimes in arab oil economies time to rethink the paradigm this study examines implications of the current exchange rate regimes on the macroeconomic and growth performance of five arab oil producing countries saudi arabia the uae sudan algeria and yemen the study evaluates alternative exchange rate regime policy options towards exploring an optimal exit strategy to ensure successful transition to more sustainable exchange rate regime especially in the fixed regime economies of saudi arabia and the uae this study proposes the adoption of a transparent broad basket band and crawl bbc regime by the arab oil economies in order to provide a better alternative to the existing fixed pegs or dirty floats however it is imperative to note that the timing of the exit from the current regime and the extent of institutional development and market sophistications are very critical to successful transition to more sustainable regime that would provide a larger scope for counter cyclical policies and diversification in these economies