international institutional lending arrangements to sovereign borrowers abstract recent financial crises in east asia and elsewhere have illustrated the problems that plague emergency liquidity arrangements and the lender of last resort role of the international monetary fund and other international institutions in particular these act under conditions of extreme uncertainty where potential sovereign borrowers as well as private financial institutions are kept in the dark regarding the intentions of the emergency lenders and the amounts and terms of emergency liquidity that can be tapped from april 1999 longer term credit lines are being offered by the imf designed to be awarded to healthy countries before they experience contagion or distress the paper evaluates the advantages of this form of imf lending and this new trend in imf operations it is argued that provision of imf financing through such long term lending facilities is better in some senses than shorter term lending long term contracts reduce the uncertainty with respect to imf intentions moral hazard problems are reduced for the borrowing country and financial markets know the future level and terms of imf support another advantage is that long term loan contracts improve the allocation of resources within the borrowing country much as private sector facility lending is the dominant mode of finance in many markets so facility lending has efficiency advantages when it is provided by the imf this efficiency advantage is derived formally it is shown that sovereign borrowers are actually better off when utilizing these as backup lines of credit instead of emergency borrowing that is conducted after distress occurs facility lending by international institutions can lead to a welfare improvement and superior resource allocation for sovereign borrowers the intuition for this is that when financial distress drives these borrowers to increase their debt risk premia in borrowing rates would not rise at least up to the limits established by the size of the facility

trade interdependence the international financial institutions and the recent evolution of sovereign debt renegotiations abstract this paper analyzes the effect of a debtor country s pattern of trade with commercial creditors home countries on the outcome of debt rescheduling negotiations the analysis reveals that a debtor country with more market power has greater leverage in a three way debt rescheduling negotiation that includes the debtor country its creditors and the international financial institutions ifis the paper also considers the effects of the ifi sovereign debt policy on the bargaining power of the parties in debt rescheduling negotiations two bargaining frameworks analyzed and compared in the paper represent the negotiation mechanism at different stages of the ifi sovereign debt policy evolution

presidential address collateral and commitment optimal dynamic capital structure choice is fundamentally a problem of commitment in a standard trade off setting with shareholder debtholder agency conflicts full commitment counterfactually predicts the firm would rely almost exclusively on debt financing conversely absent commitment a modigliani miller like value irrelevance and policy indeterminacy result holds thus the content of dynamic trade off theory must depend on the commitment technology in this context collateral is valuable as a low cost commitment device because ex ante optimal commitments are likely to be suboptimal ex post observed capital structure dynamics will exhibit hysteresis and depart significantly from standard predictions

the demographic transition and the position of women a marriage market perspective we present international evidence on the marriage market implications of cohort size growth and set out a theoretical model of how marriage markets adjust to imbalances since men marry younger women secular growth in cohort size in the second phase of the demographic transition worsens the position of women this e ect has been substantial in many asian countries earlier and continues to be true in sub saharan africa with fertility decline cohort are now shrinking in east asia improves the position of women these demographic trends can explain the increase and spread in dowries in south asia and the persistence of polygyny in sub saharan africa we show that the age gap at marriage will not adjust in order to equilibrate the marriage market in response to persistent imbalances even though it accommodates transitory shocks jel categories j12 j13 j16

cash debt buy backs and the insurance value of reserves abstract the absence of terms of trade contingent instruments in international capital markets combined with differences in risk aversion between commercial creditors and ldc borrowers has important consequences for the welfare effects of cash debt buy backs in such circumstances secondary market prices fail to reflect the insurance value reserves have to debtors but not to creditors therefore the country buying back debt with reserves ends up unambiguously worse off even if it succeeds in capturing the full secondary market discount prevailing before the buy back

organizing debt relief the need for a new institution the banks they extended large short term credits to mexico then put pressure on the banks to reschedule mexican debt and lend more to mexico once the international monetary fund had endorsed the policies that mexico would follow to deal with its problems this was the birth of the case by case approach to the debt problem it was predicated implicitly on the belief that debtors faced a short term problem arising from an unusual combination of worldwide recession and high interest rates brought on by a shift in the policy stance of the major industrial countries on this view it was eminently sensible for debtors to take on more debt temporarily in order to pay interest on their existing debts the problem was still with us three years later however and the case by case approach was in trouble the world economy was growing again and interest rates had fallen but the debtor s export earnings were not growing and their governments were increasingly reluctant to deal with the imf which was asking for more austerity but providing less fund credit the banks were willing to reschedule larger amounts of debt for longer intervals but would put up new money only for the largest debtors

the evolutionary theory of time preferences and intergenerational transfers at each age an organism produces energy by foraging and allocates this energy among reproduction survival growth and intergenerational transfers we characterize the optimal set of allocation decisions that maximizes fitness time preference the discount rate is derived from the marginal rate of substitution between energy obtained at two different times or ages holding fitness constant time preference varies with age in different ways depending on whether an individual is immature or mature and during the transition between these stages we conclude that time preference and discount rates are likely to be u shaped across age

drift control of international reserves abstract we develop a model of optimal reserve holdings where the reserve authority controls the upward and downward drift of international reserves and chooses the trigger points that induce changes in drift we argue that this drift control model better describes the dynamic behavior of reserves than does the popular buffer stock model we present an innovative mathematical tool for analyzing the drift control based on martingale stopping theory since the reserve authority has more instruments with drift control than with a buffer stock strategy it can manage reserves at significantly lower cost

is it punishment sovereign defaults and the decline in trade sovereign defaults are associated with declines in defaulting countries trade are these declines the result of trade sanctions as the trade sanctions argument of sovereign borrowing would suggest we devise an empirical strategy to evaluate this issue based on the idea that if trade sanctions are causing the declines bilateral trade with creditor countries should fall more than trade with other countries we find that this is not the case the analysis does not yield much evidence of broader punishment strategies including a league of major creditors either these results contradict the predictions of the trade sanctions theory of sovereign borrowing

evaluating debt repurchases what are the alternatives to investment abstract a general model of debt repurchases is built which reconciles most points raised in the literature on buybacks the inclusion of assets alternative to domestic investment is shown to be of crucial importance in the analysis and leads to the reversal of some previous results it is shown that investment necessarily rises following a buyback independently of the source of the funds used the condition that determines whether or not buybacks are an attractive solution to the debtor is derived it is shown to depend on the price at which debt can be bought and on an interest differential effect

non defaultable debt and sovereign risk abstract we quantify gains from introducing limited financing through non defaultable debt into a model of equilibrium sovereign risk for an initial sovereign spread of 4 2 introducing the possibility of issuing non defaultable debt for up to 10 of aggregate income reduces immediately the spread to 1 5 and implies a welfare gain equivalent to a permanent consumption increase of 0 8 nevertheless the spread reduction achieved by the introduction of non defaultable debt is short lived our findings shed light on different aspects of proposals to introduce common euro area sovereign bonds that could be virtually non defaultable

sovereign debt structural adjustment and conditionality abstract the lack of a proper enforcement mechanism for sovereign debt generates a commitment failure as a result a sovereign may seek to improve its position in debt renegotiations and thus evade its debt obligations by reducing exports conditionality seeks to provide a solution to the incentive problem by addressing the commitment failure formalizing this argument we show that conditionality helps the repayment of sovereign debt in certain circumstances it can eliminate debt overhang especially when it is coupled with concessionary lending of sufficient magnitude it is however unable to restore first best when it is anticipated by lenders conditionality may get international financial institutions and sovereign debtors into a trap where the debt overhang persist debt rescheduling takes place periodically and conditionality continues indefinitely

debt and incentives in a dynamic context abstract the incentive problems associated with debt overhang have been shown to make debt forgiveness potentially pareto improving models studying this argument abstract from the long term character of the credit relationship we show that the debt forgiveness argument is strengthened when incentive problems are considered in a multi period context

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

a bioeconomic view of the neolithic transition to agriculture adoption of agriculture at the expense of hunting and gathering was the dramatic precondition for all modern civilization recent data suggest that because of this transition humans initially were more disease prone smaller less nourished and shorter lived to explain why individuals chose agriculture over hunting and gathering this paper develops a simple model of the evolution of preferences over the quality and quantity of children as would have been generated by our long history as a species these preferences would have induced the choice of agriculture but also would have led to these otherwise puzzling health effects l adoption de l agriculture en remplacement de la chasse et de la cueillette a ete une condition prealable dramatique pour toutes les civilisations modernes des donnees recentes suggerent cependant que en consequence de cette transition les humains sont devenus dans les premiers temps apres la transition davantage vulnerables a la maladie ont vu leur esperance de vie diminuer ont ete moins bien nourris et sont devenus plus petits pourquoi alors est ce que des individus qui avaient le choix entre deux systemes economiques ont choisi l agriculture pour expliquer ce choix ce memoire developpe un modele simple de l evolution des preferences quant a la qualite et la quantite des enfants celles ci auraient ete engendrees par notre longue histoire en tant qu espece ces preferences auraient engendre le choix de l agriculture mais auraient aussi entraine d autre part ces effets deconcertants sur la sante

mortality reductions educational attainment and fertility choice this paper develops a model where reductions in mortality are the main force behind economic development the model generates a pattern of changes similar to the demographic transition where gains in life expectancy at birth are followed by reductions in fertility and increases in the rate of human capital accumulation the onset of the transition is characterized by a critical level of life expectancy at birth which marks the movement of the economy from a malthusian equilibrium to an equilibrium with investments in human capital and the possibility of long run growth

viewpoint sustainability malthus revisited the sustainability debate concerns whether the world will experience stable or improving living standards for the foreseeable future or whether the current trajectory will overtax the natural environment leading to a crash in living standards this paper selec tively reviews relevant research focusing on both ecological concerns and technological progress and asks whether sustainability would be problematic without rapid population growth i suggest that continued demographic transition to lower fertility is the primary requirement for achieving sustainable development this is effectively a modern transla tion of malthus 1798 the paper also discusses the role of the malthusian cycle in human evolution jel classification q56 j10

the demographic transition and the sexual division of labor this paper presents a theory in which increases in female labor force participation and reductions in the gender wage gap are generated as part of a single process of demographic transition initially characterized by reductions in mortality and fertility the paper suggests a relationship between gains in life expectancy and changes in the role of women in society that has not been identified before in the literature mortality reductions affect the incentives of individuals to invest in human capital and to have children with implications for female labor force participation and the wage differential between men and women the paper also presents some empirical evidence to support the predictions of the theory

debt overhang in a business cycle model abstract we study the macroeconomic implications of the debt overhang distortion on firms investment and labor decisions we show that the distortion arises when the levels of investment and labor are non contractible and chosen after the signing of the debt contract the financial friction manifests itself as investment and labor wedges that move counter cyclically increasing during recessions when the risk of default is high their dynamics amplify and propagate the effects of shocks to productivity government spending volatility and funding costs both the size and the persistence of these effects are quantitatively important

a model of the demand for longevity and the value of life extension we specify a demand function for longevity or quantity of life along with corresponding demand functions for indicators of quality of life and a value of health and life extension function we show that the demand for health must be derived in conjunction with that for longevity and the related consumption plan and that all choices depend on initial individual endowments and terminal conditions our comparative dynamics predictions indicate that optimal health and longevity are increasing functions of endowed wealth rather than necessarily current income that improvements in opportunities to produce health can accentuate the differences between endowed health and attained longevity levels and that the value individuals ascribe to their health may be increasing over a good portion of their life cycle we use this model to analyze observed empirical variations in levels and trends of life expectancy and in exposure to health risks across different population groups

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

debt write downs and debt equity swaps in the two sector model abstract debt overhang models have motivated the possibility of pareto improving market based debt reduction schemes through the assumption that creditors can seize debtor output under default these models usually reach the conclusion that both debtor financed debt repurchases and debt equity swaps are not in the interest of debtor nations this paper re examines these conclusions for a debtor nation that also has a safe sector which is unexposed to seizure debt overhangs are then shown to distort the composition of investment in the debtor nation nominal debt reductions mitigate these distortions enhancing the potential for pareto improving debt equity swaps

recent experience with commercial bank debt reduction has the menu outdone the market abstract debt reduction at market terms has been criticized as too expensive from the point of view of the debtor the recent reduction agreements following the menu approach are partially concerted but they also possess some elements of voluntariness this raises two issues a what is the conceptual justification for such financial arrangements and b based on recent evidence to what extent have these arrangements reduced the cost of debt reduction in a review of six recent menu driven debt reduction agreements we find that the debtors achieved a far better financial result than would have been feasible with simple market buybacks

evolution of time preference by natural selection comment we reexamine alan r rogers 1994 analysis of the biological basis of the rate of time preference although his basic insight concerning the derivation of the utility function holds up the functional form he uses does not generate equilibrium evolutionary behavior moreover rogers relies upon an interior solution for a particular kind of intergenerational transfer we show such interior solutions need not generally arise hence rogers most striking prediction namely that the real interest rate should be about 2 percent per annum does not follow

time preference and life cycle consumption with endogenous survival we provide a structural theory of time preference and derive a functional form of intertemporal preferences by postulating that individuals make their life cycle consumption choices as if to maximize expected lifetime this yields a nontime separable expected utility representation where the inverse of the coefficient of intertemporal substitution exceeds the coefficient of relative risk aversion the rate of time preference depends on the inverse of expected remaining lifetime and the effect of age on the productivity of consumption in affecting health the preference formulation is applied in a standard intertemporal consumption model to illustrate the implied life cycle consumption choices

can micro credit bring development abstract we examine the long run effects of micro credit on development in an occupational choice model similar to banerjee and newman jpe 1993 micro credit is modeled as a pure improvement in the credit market that opens up self employment options to some agents who otherwise could only work for wages or subsist micro credit can either raise or lower long run gdp since it can lower use of both subsistence and full scale industrial technologies it typically lowers long run inequality and poverty by making subsistence payoffs less widespread thus an equity efficiency tradeoff may be involved in the promotion of micro credit however in a worst case scenario micro credit has purely negative long run effects the key to micro credit s long run effects is found to be the graduation rate defined as the rate at which the self employed build up enough wealth to start full scale firms we distinguish between two avenues for graduation winner graduation of those who earn above average returns in self employment and saver graduation due to gradual accumulation of average returns in self employment long run development is not attainable via micro credit if winner graduation is the sole avenue for graduation in contrast if the saving rate and self employment returns of the average micro borrower are jointly high enough then micro credit can bring an economy from stagnation to full development through saver graduation thus the lasting effects of micro credit may partially depend on simultaneous facilitation of micro saving eventual graduation of the average borrower rather than indefinite retention should be the goal of micro banks if micro credit is to be a stepping stone to broad based development rather than at best an anti poverty tool

permanent vs transitory components and economic fundamentals any non stationary series can be decomposed into permanent or trend and transitory or cycle components typically some atheoretic pre filtering procedure is applied to extract the permanent component this paper argues that analysis of the fundamental underlying stationary economic processes should instead be central to this process we present a new derivation of multivariate beveridge nelson permanent and transitory components whereby the latter can be derived explicitly as a weighting of observable stationary processes this allows far clearer economic interpretations different assumptions on the fundamental stationary processes result in distinctly different results but this reflects deep economic uncertainty we illustrate with an example using garratt et al s 2003a small vecm model of the uk economy

sovereign debt optimal contract underinvestment and forgiveness in this paper we develop a time consistent rational expectations model which analyzes the equilibrium loan contract between a borrowing country and a foreign bank the loan contract specifies both the amount of the loan and the promised interest payments and rationally reflects the investment decisions of the country and the possibilities of renegotiation and repudiation of the debt an important feature of the model is that at the initial negotiation of the loan there is uncertainty about whether the country will renegotiate for partial forgiveness in the future and whether it will eventually repudiate the debt even having successfully renegotiated moreover the probabilities of renegotiation and repudiation and the amount of possible forgiveness are endogenously determined in the model the repudiation decision is directly related to the underinvestment problem the objective of the renegotiation is precisely to alleviate this problem the model is used to analyze the effects of four variables on both the optimal contract and the country s welfare the degree of penalties that a bank can impose on a defaulting country the uncertainty of production the productivity of investments and the riskless interest rate the analysis has policy implications as well as testable predictions during the last ten years the issues related to less developed countries ldcs debt have become increasingly more important in the world economy the main reason for this is the significant increase in the amount of debt outstanding and the consequent higher yearly interest payments by 1988 seventeen highly indebted countries had an aggregated debt of 510 billion dollars see rogoff 1990 a second important reason is that starting in 1982 some of these countries suspended debt service payments creating a serious crisis of confidence in the banking system of the lending countries as a consequence borrowers and lenders have had to engage in negotiations including the rescheduling of the repayments and possibly partial forgiveness a number of papers have suggested that forgiveness could conceivably make both lenders and borrowers better off because the country

the multivariate beveridge nelson decomposition with i 1 and i 2 series the consumption euler equation implies that the output growth rate and the real interest rate are of the same order of integration i e if the real interest rate is i 1 then so is the output growth rate and hence log output is i 2 to estimate the natural rates and gaps of macroeconomic variables jointly this paper develops the multivariate beveridge nelson decomposition when some series are i 1 and others are i 2 the paper applies the method to japanese data during 1980q1 2013q3 to estimate the natural rates and gaps of output inflation interest and unemployment jointly

secret buy backs of ldc debt we analyze the buy back of its debt by an ldc contrary to previous analyses of this subject we assume that the debtor can hide its transactions behind the veil of a fictitious operator the banks we assume cannot discriminate intra bank transactions from buy backs by the debtor itself with this assumption the lenders set the price by rationally taking account of the country s incentive to repurchase its debt will the debtor undertake a buy back of its debt the answer is a qualified yes large buy backs will take place

iq in the production function evidence from immigrant earnings the cross country growth literature especially sala i martin 1997 sala i martin doppelhofer and miller 2004 has found that traditional education measures rarely have a robust relationship with growth and productivity elementary education being a rare exception by contrast a new empirical growth literature jones and schneider 2006 lynn and vanhanen 2002 ram 2007 weede 2004 weede and kampf 2002 has shown that a nation s average iq has a remarkably robust relationship with its productivity figure 1 that a test designed by psychologists should have such a robust relationship with economic variables is a puzzle that demands explanation for instance jones and schneider showed that national average iq was more robust than other human capital variables and was statistically significant at the 1 level in all 455 growth regressions that controlled for all 18 factors that passed sala i martin doppelhofer and miller s 2004 robustness tests of course as with all the growth regression literature a key difficulty is disentangling cause and effect thus in this article we run no growth regressions whatsoever instead we perform a simple calibration of the iq productivity relationship based on widely agreed upon microeconomic parameters that means we can directly estimate one causal channel running from cognitive ability to productivity in the process we learn the following 1 if one knows the average iq of a nation s citizens as estimated by lynn and vanhanen 2002 2006 one can predict the average wages that immigrants from that country will earn upon their arrival in the united states whether or not one controls for immigrant education and even if the test is completely visual rather than verbal in other words national average iq predicts part of what hendricks 2002 calls unmeasured worker skill 2 we find that a 1 point increase in national average iq predicts 1 higher immigrant wages precisely the value found repeatedly in microeconometric studies note that by construction 1 iq point approximately equal to 1 15th of a standard deviation within any large national population together points 1 and 2 provide further evidence that cross country iq tests are valid predictors of worker productivity 3 when iq is added to the production function in the form implied by traditional externality free human capital theory differences in national average iq are quantitatively significant in explaining cross country income differences that said our productivity accounting exercise does not resolve the puzzle of why high iq countries are 15 times richer than low iq countries in a related vein hanushek and kimko 2000 use national math and science test scores to verify that cognitive skills appear to matter more for groups than for individuals like us they use immigrants to the united states as a way to test whether immigrants bring their home country productivity levels along with them when they immigrate to the united states when they interpret their results within a solow type framework they conclude that the cross country growth equation results are much larger than the corresponding results for individual earnings in sum our article rigorously explores the quantitative magnitude of the puzzle uncovered by hanushek and kimko 2000 and hanushek and woessman 2007 but by using iq tests rather than other widely used math and science test scores we can often double our sample size while simultaneously using the most widely analyzed best understood form of cognitive test we begin with an overview of the recent psychological literature on the validity of iq tests and then proceed to our discussion of the link between iq and immigrant wages the discussion of iq and immigrant wages yields a key parameter gamma the iq semi elasticity of wages which we use in our development accounting exercise we then discuss the questions of reverse causality and trends in the iq productivity relationship over the past 40 yr and conclude by discussing how our results fit into the growth literature

sovereign debt repurchases no cure for overhang troubled debtor countries do not gain by repurchasing external bank debt at market discount even if a buyback would stimulate investment by relieving debt overhang the reason is that buybacks allow creditors to reap more than 100 percent of any efficiency gains that might result from increased investment we show that open market buybacks provide a benchmark for evaluating more complex negotiated buyback deals by comparing any given deal with a hypothetical market buyback of the same size one can derive upper and lower bounds on the gain to the country we apply our model to the 1990 mexican debt deal

imf conditionality as a screening device a theoretical model is developed in which adoption of an imf programme signals a country s productivity it is assumed that there are two types of country one with a high return on investment and the other with a low return the country s type is known only to itself in the presence of a debt overhang the high productivity country may choose not to undertake the investment despite it being socially efficient to do so in this case the creditor would like to offer the country some debt reduction but the low productivity type will also benefit from the debt reduction this problem can be avoided if the country has sufficient resources to engage in a debt buyback in order to gain the debt relief only the high productivity type would be prepared to sacrifice current resources for the debt reduction and thus a separation of the types is achieved this is similar to an argument found in acharya and diwan 1993 we argue however that it is unlikely that a heavily indebted country will have sufficient resources for a buyback if the country is credit constrained an alternative screening mechanism is to undertake an imf programme in return for debt reduction and possibly an imf loan this mechanism can be the equilibrium outcome even if the programme creates only disutility for the country s policy makers

are buybacks back menu driven debt reduction schemes with heterogeneous creditors abstract we analyze the mechanics of menu driven debt reduction deals similar to those recently initiated by debtor countries in which heterogeneous banks choose freely between selling or retaining their debt claims we show that menu deals can facilitate discrimination across heterogeneous banks because of imperfections in the secondary market for debt this implies that menu deals are likely to dominate market buybacks and pure concerted relending agreements particularly when banks differ widely in their valuation of claims on the debtor

the evolution of strategic sophistication this paper investigates the evolutionary foundation for our ability to attribute preferences to others an ability that is central to conventional game theory we argue here that learning others preferences allows individuals to efficiently modify their behavior in strategic environments with a persistent element of novelty agents with the ability to learn have a sharp unambiguous advantage over those who are less sophisticated because the former agents extrapolate to novel circumstances information about opponents preferences that was learned previously this advantage holds even with a suitably small cost to reflect the additional cognitive complexity involved jel c73 d11 d83

evolution of time preference by natural selection this paper entertains the hypothesis that human time preferences are in evolutionary equilibrium i e that no mutation changing time preferences could be favored by natural selection this hypothesis implies that the marginal rate of substitution mrs holding darwinian fitness constant must equal the mrs holding utility constant furthermore in a market economy the latter must equal the mrs in exchange exploiting these principles the author finds that the long term real interest rate should equal ln 2 per generation about 2 percent per year and that young adults should discount the future more rapidly than their elders copyright 1994 by american economic association

viewpoint the economics of hunter gatherer societies and the evolution of human characteristics we argue for attention to the evolutionary origins of economic behaviour going beyond this we argue that the economy of hunting and gathering was the context in which evolution shaped human characteristics that underlie modern economic behaviour we first reconsider the basic biological question of why aging occurs at all we then illustrate the usefulness of considering foraging economics by asking why it is biologically advantageous for humans to live long after their reproductive career is over further we argue that foraging economics would have led to the simultaneous exaggeration of intelligence and of longevity that is characteristic of humans jel classification a12 j10 l economie des societes de chasseurs cueilleurs et l evolution des traits humains les auteurs suggerent qu on doit porter plus d attention aux origines evolutionnaires du comportement economique poussant un pas plus loin ils suggerent que l economie des chasseurs cueilleurs a ete le contexte ou l evolution a conforme les traits humains qui sous tendent le comportement economique moderne d abord ils reexaminent la question biologique de base a savoir pourquoi il y a vieillissement ensuite ils illustrent l utilite d une economie des activites de cueillette chasse et engrangement en posant la question a savoir pourquoi il est biologiquement avantageux pour les humains de bien vivre apres que leur periode de reproduction active est terminee finalement ils suggerent que ce type d economie aurait entraine simultanement une surestimation de l intelligence et de la longevite deux traits des humains

a theory of time preference grant a taylor this article proposes that people generally prefer present consumption to future consumption because their expected utility from consumption eventually falls as their mental and physical abilities eventually decline with age moreover contrary to the ubiquitous intertemporal formulation with a constant rate of time preference and contrary to three recent theories of time preference that predict decreasing discounting as people age this article asserts that discounting increases over the life cycle this hypothesis is supported by data from the panel study of income dynamics as well as evidence from numerous previous studies jel d91 1 introduction despite the almost universal assumption of time preference in models of intertemporal choice an adequate explanation of why people discount the future has not been provided 1 olsen and bailey 1981 make a convincing case for positive time preference by contradiction i e without time preference models of intertemporal choice do not yield predictions consistent with observed behavior but they do not explain why individuals would rationally discount the future 2 three recent studies have attempted to provide the explanation rogers 1994 argues that societies that discount the future at a rate of about 2 will be the long run survivors in an evolutionary fitness situation 3 posner 1995 argues that discounting occurs because individuals have multiple selves that is people are weighting their present consumption far more heavily than their future consumption because the present self and the future self are in some meaningful sense separate persons 92 becker and mulligan 1997 argue that discounting occurs because of a rational defective recognition of future utilities 730 but as will be shown these three theories are inconsistent with empirical evidence on consumption over the life cycle in at least one important aspect this article constructs and empirically supports a new theory of time preference the hypothesis is that people do not have an intrinsic preference for present consumption relative to future consumption instead the instantaneous utility function also known as the felicity function is expected to vary with age just as people s physical and mental abilities vary with age in other words the ability to enjoy consumption eventually deteriorates over the life cycle along with other abilities this life cycle view of the expected utility function causes people to rationally devalue consumption in periods of low expected felicity that is discount future consumption perhaps this is what is meant by the cliche don t wait until you are too old to enjoy it moreover this causes individuals implicit discount rates to vary systematically with age 4 in fact this provides the testable implication of the theory the standard specification of intertemporal preferences holds the discount rate constant over th e life cycle 5 to be more precise in the early stage of the life cycle the capacity to enjoy consumption may be expected to rise hence a young individual s discount rate may be negative figure 1 illustrates this possibility with a hypothetical adult life cycle marginal felicity function for a given level of consumption u sub c c a c denotes consumption and a denotes age and its corresponding discount rate function rho a the vast majority of wealth is held by older people that is those in the declining stage of their abilities thus the preference for present consumption over future consumption appears to hold in the aggregate this view of intertemporal preferences may at first seem inconsistent with practically all dynamic analyses which are based on the notion of stationary utility on further consideration however the hypothesis is quite consistent with modern consumer theory since becker 1965 it has been widely accepted that households derive utility from commodities that are produced with market goods combined with household time and skills i

bank heterogeneity reputation and debt renegotiation this paper examines a process of debt renegotiation in which banks possess divergent interests and there is asymmetric information the authors assume that large banks must exert pressure on small banks in order to obtain participation of these in the provision of new money and in debt forgiveness making use of a reputational model they argue that the effect of asymmetric information as to the amount of pressure that large banks can exert on small banks makes the debtor countries worse off than absent these asymmetries in information this also provides a rationale for the growing popularity of exit bonds copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

on the incentives associated with sovereign debt abstract this paper revisits the question of whether a sovereign s desire for future access to international credit markets which it retains by paying its international debts constitutes by itself enough of an incentive to make it a reliable customer for commercial lenders the answer is no as it is in the earlier analysis of bulow and rogoff but the result here is in certaincases stronger a defaulter here is excluded from participating in credit markets as both a debtor and a creditor whereas in the previous analysis a key assumption was that defaulters could return as creditors

communication commitment and growth abstract we study the effect on the growth of an economy of alternative financing opportunities in a stochastic growth model with incentive constraints efficient accumulation mechanisms are designed and computed for economies that differ in their incentive structure we show that when borrowing is subject to information constraints there is a computable efficient transfer mechanism that does not affect capital accumulation and investment patterns even though consumption patterns and the distribution of wealth are affected in contrast enforcement constraints can severely reduce the outside financing opportunities and affect investment patters and economic growth we adapt numerical algorithms for obtaining numerical solutions of these models

sovereign liquidity crises the strategic case for a payments standstill is sovereign borrowing so different from corporate debt that there is no need for bankruptcy style procedures to protect debtors with the waiver of immunity sovereign debtors who already face severe disruption from short term creditors grabbing their currency reserves are also exposed to litigious creditors trying to seize what assets they can in a race of the vultures shielding sovereign debtors from inter creditor conflict by authorised standstills on payments doubt less runs some risk of debtor s moral hazard but the lack of an orderly procedure for resolving sovereign liquidity crises means that the imf is de facto forced to bail out countries in trouble this leads to both debtor and creditor moral hazard as investors lend without monitoring knowing that their investments are essentially guaranteed the strategic case for legalising standstills is to rescue the international financial system from this time consistent trap

the evolution of human life expectancy and intelligence in hunter gatherer economies the economics of hunting and gathering must have driven the biological evolution of human characteristics since hunter gatherer societies prevailed for the two million years of human history these societies feature huge intergenerational resource flows suggesting that these resource flows should replace fertility as the key demographic consideration it is then theoretically expected that life expectancy and brain size would increase simultaneously as apparently occurred during our evolutionary history the brain here is considered as a direct form of bodily investment but also crucially as facilitating further indirect investment by means of learning by doing

debt buybacks debt reduction and debt rescheduling under asymmetric information in the early nineties there was a significant recovery of many debtridden economies after the shift in debt policy implicit in the socalled brady plan yet the use of scarce resources from debtor countries to buy back part of their debts remains a controversial feature of this plan we use a multiperiod model of debt overhang to show that under asymmetric information this transfer of resources emerges naturally as part of the shift from a strategy of debt rescheduling to one of debt reduction after nearly a decade of suffering from debt ridden economies in the early nineties many countries with large external debts finally reduced their debt service ratios regained access to spontaneous private financing and achieved higher growth and lower inflation imf 1993 many analysts have since attributed at least part of this success to the shift in the international debt strategy in 1989 which took a new direction with the so called brady initiative l a rather controversial feature of this initiative was the use of scarce resources from the debtor countries to buy back part of their debt there are two reasons why this use of a country s resources seems unwise first capital has more value in the debtor country than abroad thus transferring additional current resources from the country to its creditors at fair prices would appear to be welfare reducing second contrary to the idea that by repurchasing its debt in the open market a debtor country benefits from the discount price bulow and rogoff 1988 1991 prove under assumptions that include symmetric information that these buybacks hurt the country since the purchase price2 incorporates and transfers to the seller all the benefits caused by a reduced debt 3

the origin of utility sexual selection and conspicuous consumption abstract this paper proposes an explanation for the universal human desire for increasing consumption and the associated propensity to trade survival opportunity off conspicuous consumption i argue that this desire was moulded in evolutionary times by a mechanism known to biologists as sexual selection whereby an observable trait conspicuous consumption in this case is used by members of one sex to signal their unobservable characteristics valuable to members of the opposite sex it then shows that the standard economics problem of utility maximisation is formally equivalent to the standard biology problem of the maximisation of individual fitness the ability to pass genes to future generations and thus establishes a rigorous theoretical foundation for including conspicuous consumption in the utility function

population technology and growth from malthusian stagnation to the demographic transition and beyond this paper develops a unied growth model that captures the historical evolution of population technology and output it encompasses theendogenous transitionbetween three regimes that have characterized economic development the economy evolves from amalthusianregime wheretechnologicalprogressis slow andpopulationgrowthprevents anysustainedriseinincomepercapita intoapost malthusianregime wheretechnological progress rises and population growth absorbs only part of output growth ultimately a demographic transition reverses the positive relationship between income and population growth andtheeconomyentersamoderngrowthregimewithreducedpopulationgrowth

strategic models of sovereign debt renegotiations the sovereign debt literature has often implicitly assumed that all the power in the bargaining game between debtor and creditor lies with the latter this paper explores that assumption by analyzing three game theoretic models of debt renegotiations in two of the models both of which are built on the traditional one sector growth model all the subgame perfect equilibria have an extreme form in which the game s surplus is captured by the creditor the third game has many subgame perfect equilibria that do not have this feature however the roles of various assumptions in all three games are examined

sovereign risk and secondary markets conventional wisdom says that in the absence of default penalties sovereign risk destroys all foreign asset trade we show that this conventional wisdom rests on one implicit assumption that assets cannot be retraded in secondary markets without this assumption foreign asset trade is possible even in the absence of default penalties this result suggests a broader perspective regarding the origins of sovereign risk and its remedies sovereign risk affects foreign asset trade only if default penalties are insufficient and secondary markets work imperfectly to reduce its effects one can either increase default penalties or improve the working of secondary markets jel f34 g12 g15

information forecasts and measurement of the business cycle the beveridge nelson bn technique provides a forecast based method of decomposing a variable such as output into trend and cycle when the variable is integrated of order one i 1 this paper considers the multivariate generalization of the bn decomposition when the information set includes other i 1 and or stationary variables we show how the relative importance of the cyclical component depends on the size of the information set and is necessarily higher with multivariate bn decompositions the results are illustrated using post wwii united states data an explanation is also provided for the empirical finding of a positive association of the multivariate bn cycle with output growth

output volatility and openness to trade a reassessment many economists believe that while openness to trade increases average gdp growth rates it also raises output volatility by exposing countries to terms oftrade shocks this view does not take into account that commercial trade might also reduce financially related volatility once this is taken into account the relationship between exposure to trade and output volatility is still an open question this paper presents new empirical evidence that suggests that the net effect of trade openness on output volatility is stabilizing the results confirm that exposure to trade raises output volatility through the terms of trade channel as previously documented in the literature but also show that this is counteracted by a quantitatively larger stabilizing effect additional evidence is presented showing that the latter effect comes at least in part through the financial channel the methodology employed seeks to correct for the likely endogeneity of trade in this setting using gravity estimates as instrumental variables

the role of multilateral institutions in the market for sovereign debt creditor country governments have an interest in avoiding defaults by sovereign debtors because default sanctions may be costly to their citizens as a result a standard bargaining model predicts that debtors do not repay in equilibrium even if the threat of sanctions is credible on the part of the banks by contracting with a third party such as a multilateral institution with some degree of independence creditor country governments can precommit not to intervene in equilibrium when debt renegotiation occurs the sovereign receives a subsidy from the multilateral agency the model is used to interpret recent debt reduction operations