linear adjustment costs and seasonal labor demand evidence from retail trade firms standard models of dynamic labor demand rely on the presence of adjustment costs to explain the observed smoothness in employment patterns although the costs are often difficult to quantify the experience rating feature of the u s unemployment insurance ui system provides a measurable linear cost of adjustment using a unique data set with administrative data on over 8000 firms i estimate the effect of a ui induced linear adjustment cost on seasonal labor demand in retail trade i find strong support for the large role of adjustment costs in reducing the employment response of firms to seasonal fluctuations in demand

exchange rates and the political economy of macroeconomic discipline during the last few years there has been an increasing interest in understanding the relationship between exchange rate regimes and macroeconomic stability some recurrent policy questions are a why do countries still choose fixed nominal exchange rate regimes 25 years after the abandonment of the bretton woods system b do fixed exchange rate regimes impose an effective constraint on monetary and fiscal behavior thus lowering inflation rates over the long run and c are exchangerate based stabilization programs superior to money based programs this paper deals with the first question the selection of the exchange rate regime from a politicaleconomy perspective why certain countries choose a particular type of exchange rate regime is a highly relevant question why does austria have a fixed exchange rate for example while the united kingdom has a flexible one why has argentina chosen a fixed exchange rate while chile has a flexible cumbands system more generally in december 1992 why did 84 countries out of the 167 reported in the imf s international financial statistics peg their currencies to a major currency or a currency composite the theoretical discussion deals with the trade off between credibility and flexibility and it emphasizes the role of politics and institutions in the empirical section i use a large cross country panel data set to analyze the role of various factors including political instability in decid

missed opportunities the wto trade policy review for the east african community the east african community eac comprising kenya tanzania and uganda came into force on 7 july 2000 with a common external tariff cet established in january 2005 this trade policy review tpr of the eac is timely as all three countries had implemented significant trade liberalisation since the late 1980s while the cet represented an asymmetric change kenya and tanzania essentially reduced tariffs whereas uganda increased tariffs the tpr provides considerable information on the cet and on trade and related policies in each of the member countries however the eac and the tpr missed a number of opportunities the eac included no coordinated export promotion or investment provisions while the tpr says little on the potential for intra regional trade and nor does it address the position of the eac in the economic partnership agreements epas being negotiated with the eu this review concentrates on these omissions to explore the implications of the eac for developments in trade policy in the region

the economics of development a survey i the subject our definition of the subject will be the use of economic analysis to understand the economies of poor or developing countries this includes in particular how standards of living in the population are determined and how they change over time and further how policy can or should be used in the influence of these processes the definition contains in principle much or most of analytical methods in economics insofar as they can be put to use in the examination of the issues of interest this is as it should be but it poses a problem for a survey in a journal a comprehensive treatment is infeasible so we shall follow a different route the survey will focus on what i take to be the major themes and approaches which characterise the productive aspects of the subject there is therefore no pretence at being exhaustive the purpose is rather to highlight some of the advances many of these have been of real substance there are a number of possible purposes for a survey and it is important to be clear at the outset for whom it is intended what it is and what it is not this survey is addressed to economists and students of economics who know the tools of their trade but not necessarily how they have been applied to and fashioned for the analysis of the economics of developing countries it is a description of the ways in which problems can be productively formulated and approached in terms of examples chosen for their intrinsic importance and interest the vastness of the subject means that we have to be highly selective it does not seek to provide a summary evaluation of the current view of the appropriate response to immediate policy questions it is not a history of thought nor a research manifesto nor an attempt to adjudicate or settle the major debates where they arise naturally from the major purpose some judgements on these subjects will be offered but they do not themselves constitute the primary intent of this survey there are three lines of enquiry or sets of questions which have i suggest been distinctive of the most fruitful work in development economics they will

coffee economic fluctuations and stabilisation an intertemporal disequilibrium model with capital market imperfections abstract this paper develops a two period disequilibrium model of a small open economy under keynesian unemployment to analyse the effects of temporary anticipated and permanent coffee price shocks the model includes a government sector that administers a commodity price stabilisation fund and allows for capital market imperfections the type of capital market imperfection makes an important difference to the results of the model in particular when the government borrows on more favourable terms than individuals the coffee price stabilisation fund reduces the multiplier effects of temporary and permanent shocks not only in the first but also in the second period by contrast when individuals face an upward sloping supply of capital curve the stabilisation fund shifts some of these effects from the first to the second period

on becoming more flexible exchange rate regimes in latin america and the caribbean abstract this paper examines the shift from fixed to more flexible exchange rate regimes among countries in latin america and the caribbean in contrast to most traditional approaches the one followed here recognizes that fixed rates can be and often are adjusted but argues that policy makers incur a political cost from devaluation at the same time flexible exchange rates even managed ones may be very volatile with persistent misalignment a stylized model of regime choice is developed based on the perceived losses from exchange rate misalignment incurred under fixed versus more flexible regimes the model is estimated for a sample of 24 countries over the period 1978 1992 and empirical results are quite supportive misalignments proxied by current account deficits and moderate to high rates of inflation were associated with a move to more flexible rates during 1978 1986 misalignment indicators appear to have mattered less during 1987 1992 however there appears to have been a major reduction in the perceived difficulty of managing flexible rates during this period the paper then cautions against attributing differences in economic growth between groups of countries to their exchange regime the central point here is that the endogeneity of regime choice introduces selection biases into the samples of countries with fixed and with more flexible exchange regimes

explaining exchange rate volatility an empirical analysis of the holy trinity of monetary independence fixed exchange rates and capital mobility abstract this paper uses a panel of data from twenty two countries between 1967 and 1992 to explain exchange rate volatility focusing on potential tradeoffs between fixed exchange rates independent monetary policy and capital mobility i use monetary models to parameterize monetary divergence and factor analysis to measure capital mobility exchange rate volatility is loosely linked to both monetary divergence and the degree of capital mobility interestingly exchange rate volatility is significantly correlated with the width of the explicitly declared exchange rate band even after taking monetary divergence and capital mobility into account

coffee export booms and monetary disequilibrium some evidence for colombia the theoretical models that analyse the monetary consequences of export booms show that under a regime of fixed exchange rates they affect not only the demand for money via real income but also the money supply via foreign exchange accumulation within this theoretical framework this study proposes an empirical approach to determine whether the coffee booms of the second half of the 1970s and mid 1980s led to excess money supply in the colombian economy the findings provide evidence in favour of a direct association between coffee export booms and excess money supply implying that external disturbances jeopardize the ability of the economic authorities to carry out successful monetary policy

firm behaviour and market access in a free trade area with rules of origin we study a free trade area with rules of origin and show that there are two distinct regimes comparative statics results for the two regimes are exact opposites and a regime switch occurs when roo become restrictive enough consequently imports into the fta of the intermediate good first fall and then rise while the opposite pattern occurs for imports of the final good and for the price of the domestic input we also show that tighter roo have opposite effects on the well being of final versus intermediate

endogenous changes in the exchange rate regime a bureaucratic incentive model public choice submits that legal changes can be endogenous in such a way that they are manipulated by bureaucrats who want to maximize rents from transactions with various interest groups this paper takes the change in exchange rate regimes to empirically examine the premise it offers a two stage method in which we first show that the exchange rate is influenced by interest group pressures and subsequently that the 1990 market average regime mar as a phase in policy in korea was introduced mainly to serve bureaucratic incentives this method is expected to be useful to a host of countries for various studies attempting to test a possible existence of bureaucratic or other hidden motivations behind any isolated event of policy change

politics and exchange rate forecasts abstract standard exchange rate models perform poorly in out of sample forecasting when compared to the random walk model we posit part of the poor performance of these models may be due to omission of political factors we test this hypothesis by including political variables that capture party specific election specific and candidate specific characteristics surprisingly we find our political model outperforms the random walk in out of sample forecasting at 1 12 month horizons for the pound dollar mark dollar pound mark and the trade weighted dollar mark and pound exchange rates

did regional economic diversity influence the effects of the great recession using data for u s counties from 2005 to 2012 we test whether higher levels of economic diversity mediated the effects of the great recession via four measures of stability spatial spillover effects are modeled by the use of the spatial durbin estimator with heteroscedastic errors the data generally support the central hypothesis that higher levels of diversity within a county are associated with enhanced employment stability across all counties as well as subsets of metro and nonmetro counties results for wage stability however appear to contradict our other findings we suggest that underlying labor elasticities can bridge these apparent contradictory results jel r11 r12 o47

economic adjustment and exchange rates in developing countries in spite of the attention paid exchange rates in recent economic debates on developing countries relatively few studies have systematically analyzed in detail the various ramifications of exchange rate policy in these countries in this new volume from the national bureau of economic research leading economists use rigorous models to tackle various exchange rate issues while also illuminating policy implications that emerge from their analyses the volume divided into four main sections addresses the role of exchange rates in stabilization programs and the adjustment process the importance of exchange rate policy during liberalization reform in developing countries exchange rate problems relevant and unique to developing countries illustrated by case studies and the problems defining measuring and identifying determinants of real exchange rates authors of individual papers examine the relation between commercial policies and exchange rates the role of exchange rate policy in stabilization programs the effectiveness of devaluations as a policy tool and the interaction between exchange rate terms of trade an capital flow this research will not only prove crucial to our understanding of the role of exchange rates in developing countries but will clearly set the standard for future work in the field

domestic and foreign price links in an aggregate supply framework the case of greece abstract using price and wage equations an aggregate supply relationship is derived which relates domestic to foreign prices and output it is shown that among all parameters only the degree of wage indexation matters to the question of whether the nominal exchange rate can affect competitiveness cointegration results support the existence of a long run relationship among the variables of the model which is in conformity with the relationship derived in the theoretical part of the paper empirical analysis a does not confirm relative purchase power parity for greek wholesale price indices and b does not contradict the hypothesis that greek producer prices are homogeneous of degree one in foreign prices

local economic instability and business location the case of maine this paper investigates the effects of local economic instability on business location in maine instability is represented by the quarterly six month and annual persistence of employment in maine municipalities and seasonal spikes in local employment regression results suggest that businesses are attracted to areas with high short term and seasonal stability but that annual fluctuations in local employment are not a significant deterrent to new business activity services businesses are particularly sensitive to local employment fluctuations presumably because they are often highly integrated into the economy findings suggest that policymakers can jointly pursue the objectives of local economic growth and stability

real exchange rate variability and the choice of exchange rate regime by developing countries abstract this paper draws together two distinct strands of the exchange rate literature it proposes that real exchange rate variability and the choice of exchange rate regime are jointly determined i test this claim by estimating a simultaneous limited dependent variable model with data from a cross section of developing countries during the recent floating period drawing on the relevant exchange rate literature the paper examines a number of exogenous determinants of exchange rate variability and the choice of exchange rate regime

financial development and the instability of open economies this paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies our basic model is a dynamic open economy model with a tradeable good produced with capital and a country specific factor we also assume that firms face credit constraints with the constraint being tighter at a lower level of financial development a basic implication of this model is that economies at an intermediate level of financial development are more unstable than either very developed or very underdeveloped economies this is true both in the sense that temporary shocks have large and persistent effects and also in the sense that these economies can exhibit cycles thus countries that are going through a phase of financial development may become more unstable in the short run similarly full capital account liberalization may destabilize the economy in economies at an intermediate level of financial development phases of growth with capital inflows are followed by collapse with capital outflows on the other hand foreign direct investment does not destabilize

currency devaluation aggregate output and the long run an empirical study abstract this paper estimates the effect of currency devaluation on the aggregate output level in six asian countries using a unique methodology developed by wickens et al 1988 economic journal 189 205 the estimated results suggest that devaluation in general is neutral in the long run in some cases it even can have a contractionary effect

a medium term framework for analyzing the real exchange rate with applications to the philippines and tanzania a competitive official real exchange rate is important to external balance and sustainable medium term growth in developing countries this article presents a methodology for estimating appropriate real rate and provides a basis for evaluating the extent to which the prevailing rate is misaligned in particular the medium term equilibrium real exchange rate is evaluated by estimating the effects of structural factors on the trend observed for a country s real rate compared with the rates of its major trading partners taking into account the effects of macroeconomic policy structural factors include terms of trade external capital flows and trade policy plus other factors relevant to the circumstance of individual countries the implied change in the medium term equilibrium real rate is compared with that of a historical reference period the application of this methodology to two developing countries the philippines and tanzania illustrates how it can complement and improve upon other analytic approaches such as those using purchasing power parity and analysis of parallel rates this approach is complemented by an analysis of the relation between a country s real exchange rate and those of its major competitors

disequilibrium exchange rates as industrialization policy abstract this paper deals with a long standing puzzle why are developing countries so reluctant to change their exchange rates when their currencies have become blatantly overvalued the argument developed here is the following under circumstances that are fairly common to real economies a policy which deliberately maintains the exchange rate at a disequilibrium level can be welfare increasing by promoting structural change this can come via the presence of a systematic link between the real exchange rate and the manufacturing sector s terms of trade vis a vis agriculture the paper considers a model in which there exists a relationship between these two due to technological factors using a two period two sector general equilibrium model it demonstrates that such a link provides authorities with a tool which can be manipulated to bring about industrial growth and increase welfare in the presence of unrealized learning by doing effects

jobs in the bureaucratic afterlife a corruption facilitating mechanism associated with law enforcement this article starts with an observation that the employment of former regulatory officers by a regulated firm might be an integral part of the corruption facilitating mechanism cfm the article hypothesizes that such employment constitutes the deferred payment for the corruption previously supplied although anecdotal evidence of this kind of corruption abounds it has proven difficult to substantiate the article provides an explanation for why this deferred payment arrangement might be attractive to both demanders and suppliers of corruption it also offers tentative empirical support for the hypothesis that it plays a role as cfm in korea with the implication that this cfm hypothesis can be generalized to a host of regulatory countries according to a report that the berlin based transparency international ti 1997 published before the onset of the korean economic crisis korea did not fare as well as during the previous year in ti s annual country rankings concerning the prevalence of corruption in society the ti corruption perception index cpi which measured corruption in public life in particular put korea in 34th place down seven places from the previous year and korea s ranking has not improved since the essential insight that the economic models of the law enforcement process offer is that corruption comprises the implementation of government regulations since the returns realized by law enforcers in exchange for supplying corruption exceed the costs the ability of the legislature and the general public to monitor the discretionary implementation by law enforcers is naturally limited benson 1988 this article from the perspective of the economic theory of regulation mcchesney 1997 focuses on corruption mainly as it occurs during the enforcement of regulation we argue that

south asia does preferential trade liberalisation make sense this paper systematically analyses the issue of trade liberalisation in the south asia region and offers a qualitative assessment of alternative approaches i compare two broad approaches to trade liberalisation non discriminatory and preferential the former approach can be pursued on a unilateral basis by each country in the region on a concerted basis by the countries in the region or multilateral basis under the auspices of the wto the latter approach can take the form of criss crossing bilateral free trade areas between various countries in the region or a region wide free trade area the view i take in the paper is that the move towards preferential trading is a mistake at least from the viewpoint of india india continues to have very high trade barriers so that the scope for trade diversion and the losses accompanying it are likely to be considerable business lobbies being relatively powerful in most of the countries in the region they are likely to exploit the rules of origin and sectoral exceptions in these arrangements in ways that will maximise trade diversion and minimise trade creation inasmuch as the rules of origin give bureaucrats power employment and opportunities to share in the rents created by tariff preferences they too will become active parties to the diversionary tactics of business lobbies therefore the member countries are better advised to proceed along non discriminatory lines in achieving further liberalisation

financial instability in latin america in this paper i deal with a number of issues related to financial instability in latin america i first discuss from a macroeconomic research perspective what i believe are some of the most important policy issues faced by the latin american nations these include the effectiveness of controls on capital inflows the effect of exchange rate depreciation on output and the international transmission of the business cycle second i argue that the economic research agenda on latin america should not ignore history in latin america more so than in any other region in the world there has been a self destructing tendency for repeating history 2003 elsevier ltd all rights reserved

does tourism promote cross border trade we estimate a simultaneous bivariate qualitative choice model of arizona agribusiness firms propensity to trade and visit as a tourist the cross border state of sonora mexico venture business visits quantified through the tourism equation were found to have the largest impact on a firm s propensity to trade tourist visits have a greater impact on trade when combined with other firm attributes such as age perceived need for geographic diversity foreign language fluency and firm size than if considered alone our results suggest that there is a role for government agencies to play in overcoming imperfect information related to trade opportunities through facilitating exploratory business venture and tourist visits

exchange rate regimes and the cross country distribution of the 1997 financial crisis robin m grier we study variations in the severity of the 1997 financial crisis in a sample of 25 developing countries we use both currency depreciation and stock market returns as crisis measures our key findings are that countries that started 1997 with an exchange rate peg experienced significantly greater currency depreciation and significantly lower stock returns than would be predicted from the levels of various macroeconomic indicators jel f3 f4 i introduction the asian financial crisis of 1997 is still a very hot topic a recent search of econlit turned up 243 articles in the system with asian crisis in the subject field 1 several recent articles attempt to explain variations in the severity of the crisis across developing countries using macroeconomic and financial variables and show that the distribution of the crisis is somewhat predictable our article extends this literature in two directions first we examine whether the initial exchange rate regime in place at the beginning of 1997 had any effect on the distribution of the financial crisis once the relevant macro and financial indicators are included in the model second given that a real crisis followed on the heels of the financial one we study the relationship between exchange rate regime currency depreciation and stock market performance in 1997 our sample consists of 25 developing countries in 1997 2 though a cross sectional approach limits the generality of our results we believe we can ask and answer two interesting questions about the average performance of different exchange rate regimes in 1997 the first question is controlling for economic indicators what was the average effect of having an initially pegged exchange rate on currency depreciation there are theoretical arguments presented in section ii that can justify either positive negative or zero effects we find that on average countries with a pegged regime at the beginning of the year experienced more depreciation than what was predicted by their macro indicators the second question we study is what was the average effect of currency depreciation on stock market performance in 1997 again there are arguments presented in section iii supporting either a positive negative or neutral relationship we find that on average depreciation has a marginally significant negative impact on stock returns however in the 12 countries that began 1997 with a floating exchange rate currency depreciation had a significantly positive effect on stock returns whereas the effect of depreciation on stock returns was negative and significant for the 13 countries that started the year with a pegged currency this relationship holds for stock returns measured either in u s dollars or in local currencies the papers most similar to ours in the literature are tornell and velasco 1995 edwards 1993 corsetti et al 1999 hereafter cpr and tornell 1999 tornell and velasco and edwards study whether or not the choice of exchange rate regime affects economic outcomes 3 cpr and tornell study the asian financial crisis of 1997 in the broader context of developing country performance they create a crisis index and estimate several regressions using macro and financial indicators to predict the extent of the crisis in a sample of developing countries our article applies the idea that the choice of exchange rate regime can affect macroeconomic and financial outcomes to the study of the determinants of the severity of the 1997 crisis in a model similar to those of cpr and tornell in what follows below section ii studies the relationship between macro and financial indicators the initial exchange rate regime and currency depreciation in 1997 section iii considers the depreciation exchange rate regime stock market connection in 1997 section iv presents our conclusions ii macro indicators currency depreciation and exchange rate regime in 1997 the question of what exactly determines the value of the exchange rate is an important unsolved issue in open economy macroeconomics and we are not going to settle it here

fiscal policies and the choice of exchange rate regime a common argument against either a monetary union or a regime or a fixed exchange rates is that they preclude flexible use of the inflation tax the authors address this point of view by comparing three alternative exchange rate regimes a pure float an ems regime in which the exchange rate is fixed but can be realigned and a monetary union the authors model the three regimes as alternative commitments on future seigniorage policies this approac h suggests that it is not possible to pareto rank the three regimes o n the other hand the authors provide intuitive conditions under which each of the systems is superior to the others copyright 1993 by royal economic society

the political economy of overvaluation most of the literature on political business cycles e g nordhaus 1975 macrae 1977 van der ploeg i984 assumes that the incumbent political party attempts to secure re election by maximising the expected number of votes cast in its favour at the forthcoming election and to exploit lags due to adaptive expectations the government can then fool the electorate by judiciously depressing output in the early part of its term in office in order to force down the expected rate of inflation and to create a boom without too many adverse inflationary consequences towards election eve in order to gain the sympathy of the electorate such political business cycles rely on a naive electorate and cannot occur in new classical economies with market clearing and rational expectations because then the electorate would see through the government s vote maximising strategy e g mccallum 1978 minford and peel i982 if the private sector has rational expectations and prices or wages are sticky this is observationally equivalent to adaptive expectations and flexible prices and wages e g sargent 1976 but nevertheless the electorate would see through a vote maximising strategy and thus no political business cycle would occur in any case it is not clear that the empirical evidence supports this view of the political business cycle e g frey 1978 one reason for this is that it may not be realistic to assume that output can be changed instantaneously whilst inflation can through expectations only be influenced in a gradual fashion in an open economy it is much easier and faster to affect real income and consumers prices through the exchange rate than it is to have an effect on aggregate demand output and employment an appreciation of the exchange rate immediately cuts import prices and consumers prices and therefore immediately boosts real income this combined with the reduction in the real value of imports depresses aggregate demand but over time standard neoclassical substitution effects ensure that the volume of exports decreases the volume of imports decreases and therefore aggregate demand and output increase the above argument is based on the j curve effect in the balance of trade for which there is ample empirical evidence e g diaz alejandro 1966 magee 1973 this note explores the implications of the j curve effect for the political business cycle in a small open economy as suggested by van der ploeg i984 and dornbusch i987 section iv section i sets up the model of the economy section ii derives the development of the exchange rate real income and output over the course of the political business cycle section iii concludes with an interpretation and qualification of the results

rural population growth 1950 1990 the roles of human capital industry structure and government policy human capital raises rural incomes but this effect is swamped by higher returns to human capital in urban markets this leads to brain drain from rural areas populations grow more rapidly in rural counties that have a diversified employment base farm population grows faster or declines more slowly in counties with relatively high farm income and nonfarm populations grow faster in counties with relatively high nonfarm income however higher farm incomes lead to slower nonfarm population growth and vice versa rural county government services financed by local taxes or debt have neutral or negative effects on population growth rural population in the united states increased 53 between 1900 and 1990 this increase is concentrated in the nonfarm rural sector where population has grown to three times its turn of the century level nevertheless there exists a concern that rural areas are threatened by population declines that will gradually erode the ability of communities to provide public services necessary for their citizens eventually the fear is that these communities will become too small to be selfsustaining and will disappear one might ask why these concerns exist in the face of slowly rising rural populations one reason is that the overall rural population increase masks a huge migration of labor off the farm the rural farm population has fallen to one tenth its 1900 level if a strong farm economy is necessary to sustain rural communities then the farm population decline is a threat to the future viability of rural communities on the other hand off farm employment opportunities are increasingly important to the

exchange rate policy options for post crisis southeast asia is there a case for currency baskets following the recent financial crises in southeast asia and elsewhere the perennial issue of the exchange rate policy options for small and open developing countries has resurfaced there seems to be an emerging consensus that the frequency with which soft pegs have been susceptible to speculative attacks in this era of escalating global capital flows has increased pressure for developing countries to adopt corner exchange rate regimes this paper takes issue with this popular one size fits all prescription of exchange rate arrangements for developing countries and explores exchange rate policy options for post crisis southeast asia the principal purpose of this paper is to discuss the case for currency baskets as a general regime in its own right for southeast asia as opposed to being a compromise between the two corner solutions

sources of cyclical employment instability in rural counties cyclical employment instability at the county level is examined using monthly indiana employment data for 1970 80 and a single index portfolio model results show rural counties are more responsive to systematic or cyclical employment instability than urban counties at the state level a high percentage employed in manufacturing has been associated with greater employment instability over the business cycle this relationship does not hold at the county level where most manufacturing sectors seem to cyclically stabilize the counties in which they appear

measuring exchange rate misalignment inflation differentials and domestic relative prices abstract empirical studies of exchange rate misalignment generally use crosscountry differences in overall inflation as proxy measures for a country s real exchange rate rer this paper shows that using such differential inflation proxies introduces two systematic biases in model results understatement of rer movements and a spurious trend towards depreciation these biases can be corrected only with disaggregated data on domestic relative prices of tradable and nontradable products using a standard model with disaggregated data for zimbabwe it is found that proxy based results understate misalignment by almost 25 and exaggerate depreciation by 4 per year

employment stability and the role of sectoral dominance in rural economies rural development has received renewed attention particularly in the west where there are opportunities for enhancing tourism in communities once reliant on extractive resources the historical focus of rural development has been on economic growth with little concern about the sustainability or socioeconomic impacts of such growth this study analyzes and discusses the employment dynamics of rural economies with varying employment bases to illustrate some possible impacts of targeting specific employment sectors as part of a rural economic development strategy the empirical research focuses on the rural counties of utah where the trade and service sectors associated with increased tourism and retirement communities have been rapidly expanding throughout the past two decades

democracy and markets the case of exchange rates the relationships between the workings of democratic institutions and currency markets are studied severa competing propositions about how political re equilibration affects currency markets are derived and tested the results support the view that democratic politics affects currency markets expectations and uncertainty about electoral outcomes and government survival affect the probability of switching between currency market equilibria additionally opinion polls about chief executive performance have a direct effect on the probabilities of switches between currency regimes suggesting that these polls cause currency traders to revise their expectations about the stability of governments and or the contents of public policies electoral institutions mitigate the impact of politics on currency market equilibria political effects are weaker in countries with proportional representation electoral systems than in countries with majority plurality systems there is less evidence that central bank independence consensual corporatist systems or political coherency reduces the effect of politics on currency markets he study of democracy and markets is at the heart of political economy understanding how political equilibration and economic equilibration are related is one of the main challenges facing this field the size and nature of currency markets make them especially important cases substantively with globalization currency markets have become important constraints on elected governments reducing their room to maneuver analytically in comparison to most goods markets currency markets are informationally efficient asset markets with distinctive equilibria today s exchange rate is determined by currency traders fully informed expectations about tomorrow s exchange rate the sensitivity of these markets to the arrival of new information therefore makes them particularly well suited for studying the effects of political news and uncertainty on economic equilibration 1 this article demonstrates there are informationally relevant political factors insofar as exchange rate determination is concerned factors that directly affect the transition probabilities between currency market equilibria moreover these factors vary in important ways across democracies some electoral institutions lessen the effects of politics on currency

exchange rate regimes and export performance of developing countries a fter the breakdown of the bretton woods system in 1973 many developing countries moved away from single currency pegging to more flexible exchange rate regimes an extensive literature on the appropriateness of various exchange rate regimes for developing countries economic performance has developed one issue concerns how developing countries choice of exchange rate regime affects their export performance comparative analyses of the impact of various exchange rate regimes on developing countries exports have however been overlooked different exchange rate regimes give rise to different tendencies for exchange rate misalignments and exchange rate volatility there are two reasons why the exports of developing countries may be subject to more severe consequences of exchange rate misalignments and exchange rate volatility than the exports of developed countries first exporters in developing countries may be expected to be more vulnerable to exchange rate misalignments since developing countries exports are often made up of raw material and agricultural products in which exporters usually have little market power it follows that exporters will have to respond to exchange rate misalignments by changing the export quantity rather than the export price second since developing countries usually have underdeveloped financial markets exchange rate volatility may be more harmful

separating economic from political influences on government decisions abstract the public interest theory is a poor predictor of government decisions relative to interest group theories but a sophisticated public interest theory is a more serious alternative to the former testing the sophisticated theory s predictions is problematic however when public interest is coincident with an interest group s interests a four step method is developed that disentangles public interest and interest group interests by separating economic from political incentives applying the method to the national forest service decisions about wilderness designations indicates whether interest groups were successful in influencing allocation decisions and whether allocation decisions were in the public interest

the political economy of trade integration in south asia the role of india the south asian regional trade integration process to date has generated only limited enthusiasm it suffers from significant shortcomings primarily on account of a very cautious approach adopted to achieve the ultimate objective of free trade within the region in turn this has led to a fragmentation of the integration process with some of the partners of the south asian association for regional cooperation saarc bloc opting for a speedier and more liberal bilateral process with india india s engagement remains the critical feature as the single most important trading partner for almost all the other south asian countries however the dynamics of indian economic integration initiatives too have been changing rapidly whereby it is looking increasingly to strengthen its economic relations with the wider asian region in this context the question of india s willingness to give leadership to carry the rest of south asia as the bridge that connects the region to east asia needs to be examined the current evidence suggests that india has attempted to do so via a host of bilateral and regional arrangements but that the divergences in strategic interests amongst saarc countries has left pakistan on the margins of an evolving scheme of overlapping trade initiatives in south asia thus while something approximating free trade in south asia appears to be taking shape it is unlikely to take the form of an inclusive south asian regional integration process envisaged by saarc

employment risk diversification and unemployment this paper studies determinants of the geographic distribution of unemployment in the united states since 1950 we argue that equilibrium differences in unemployment among markets are partially supported by corresponding differences in the covariance structure of sectoral demands for labor when workers are mobile greater diversification of sectoral demands reduces unemployment we confirm this point using pooled time series cross section data on state unemployment and employment by industry we also find evidence for nonneutrality of aggregate disturbances based on geographic differences in industrial composition and that permanent changes in the sectoral composition of employment lead to transitory fluctuations in unemployment