the differential regional effects of monetary policy this paper examines whether monetary policy has similar effects across regions in the united states impulse response functions from an estimated structural vector autoregression reveal a core of regions new england mideast plains southeast and the far west that respond to monetary policy changes in ways that closely approximate the u s average response of the three noncore regions one great lakes is noticeably more sensitive to monetary policy changes and two southwest and rocky mountains are found to be much less sensitive a state level version of the model is estimated and used to provide evidence on the channels for monetary policy

retaliation bargaining and the pursuit of free and fair trade that domestic political economic factors are important determinants of a nation s trade barriers has been empirically well established however the question of how effective strategically retaliatory trade barriers are in deterring foreign protectionism has received far less systematic empirical attention in this article we use bilateral nontariff barrier ntb data between the united states and five developed partner countries japan france germany italy and the united kingdom to systematically examine the effectiveness of strategic retaliation we employ a simultaneous tobit model where the home and foreign ntb levels are determined endogenously in a bilateral game the model provides estimates of deterrence coefficients that is the reduction in foreign trade barriers as a result of u s retaliation which we use to characterize the nature of bilateral ntb games our hope is that the empirical results presented here which have realistic though controversial implications will inform u s trade policy

trade disputes and the implementation of protection under the gatt an empirical assessment abstract this paper is a first attempt to empirically determine why countries choose to violate or adhere to gatt rules when making trade policy adjustments between negotiating rounds we use a previously unexploited set of data in which countries implemented two types of protection under the gatt system between 1973 and 1994 i legal protection in which countries utilized the gatt s safeguards provisions and ii illegal protection in which the protection was provided outside of the safeguards provisions resulting in a formal trade dispute we find substantial evidence that concerns for retaliation affect government policy decisions in ways which contribute to the explanation of the existence of trade disputes

the role of multilateral institutions in international trade cooperation the world trade organization wfo lacks the power to directly enforce agreements it is therefore important to understand what role the wto can play to facilitate international cooperation and whether a multilateral institution can offer distinct advantages over a web of bilateral agreements this paper examines two potential benefits of a multilateral trade institution first verifying violations of the agreements and informing third parties thus facilitating multilateral reputation mechanisms second promoting multilateral trade negotiations rather than a web of bilateral negotiations the model suggests that a multilateral approach is particularly important when there are strong imbalances in bilateral trading relationships

backward stealing and forward manipulation in the wto abstract motivated by the structure of wto negotiations we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most favored nation mfn principle we identify backward stealing and forward manipulation problems that arise when governments bargain under the mfn principle in a sequential fashion we show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed we identify the wto nullification or impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems in this way we suggest that wto rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process

financial contracting under extreme uncertainty an analysis of brazilian corporate debentures abstract economic volatility high transaction costs and fragile institutions hinder financial contracting in emerging markets these conditions characterize the economy of brazil yet a nascent corporate bond market thrives i analyze 50 brazilian indenture agreements and find that sample debentures are characterized by i features that mitigate inflation risk for investors ii contingent maturity mechanisms that provide periodic opportunities for exit or renegotiation iii a paucity of covenants that restrict the debtor s investment financing and dividend decisions and iv self enforcement mechanisms that avoid reliance on inefficient institutions analysis of these features enhances our understanding of contracting in emerging economies

global supply chains and trade policy responses to the 2008 crisis the collapse in trade and the contraction of output that occurred during 2008 9 was comparable to and in many countries more severe than the great depression of the 1930s however it did not give rise to the rampant protectionism that followed the great crash the idea that the rise in the fragmentation of production across global value chains vertical specialization may be a deterrent against protectionism is under appreciated in the literature institutions also played a role in limiting the extent of protectionist responses world trade organization discipline raises the cost of using trade policies for member countries and has proved to be a stable foundation for the open multilateral trading system that has been built over the past 50 years using tradeand protection data for seven large emerging market countries that have a history of active use of trade policy the influence of these and other factors on trade policy responses to the 2008 crisis are empirically examined an instrumental variables strategy is used to identify their impact participation in global value chains is found to be a powerful economic factor determining trade policy responses

the value of trade agreements in the presence of political pressures an argument often heard in favor of trade agreements is that by committing to free trade a government can credibly distance itself from domestic lobbies but several existing models of endogenous protection suggest that governments have no interest in foreclosing interest group pressures since governments derive rents from the political process we develop a small country model in which factors are sector specific in the short run but mobile in the long run we show that in this setting a government may be worse off in the political equilibrium than under commitment to free trade and hence it may value a trade agreement

optimal monetary policy in a currency area abstract this paper investigates how monetary policy should be conducted in a two region general equilibrium model with monopolistic competition and price stickiness this framework delivers a simple welfare criterion based on the utility of the consumers that can be used to evaluate monetary policy in a currency area if the two regions share the same degree of nominal rigidity the terms of trade are completely insulated from monetary policy and the optimal outcome is obtained by targeting a weighted average of the regional inflation rates these weights coincide with the economic sizes of the region if the degrees of rigidity are different the optimal plan implies a high degree of inertia in the inflation rate but an inflation targeting policy in which higher weight is given to the inflation in the region with higher degree of nominal rigidity is nearly optimal

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

developing countries as plaintiffs and defendants in gatt wto trade disputes developing countries have been increasing their participation in the formal institutions and proceedings of the multilateral trading system a prominent example is their more frequent involvement as defendants and plaintiffs in gatt wto trade disputes this paper provides an initial economic appraisal of developing country performance in the gatt wto dispute settlement system we measure the economic resolution of these disputes through trade liberalisation gains and our results suggest that developing country plaintiffs have had more success under wto disputes than was the case under the gatt we also document evidence on potential determinants of this success the capacity for plaintiffs to make credible retaliatory threats and the guilty determinations by gatt wto panels finally there is also some evidence that developing countries have recognised the importance of retaliatory threats and have responded by changing their pattern of dispute initiation under the wto to better take advantage of the instances in which they have sufficient leverage to threaten retaliation and induce compliance with gatt wto obligations

a strategic analysis of sinking fund bonds abstract unlike most securities the pricing of sinking fund bonds is influenced by the distribution of ownership which summarizes the extent to which the market is cornered the effect of the distribution of ownership on the pricing of sinking fund bonds is examined by an explicit game in which the price obtained for bonds sold can depend upon the size of the investor s position this framework is used to contrast the valuation of sinking fund bonds with the valuation of amortizing bonds and straight debt we show that it is generally incorrect to view sinking fund bonds as being equivalent to serial bonds

default risk yield spreads and time to maturity this paper extends the default model of yield spreads for bonds by showing that in gen eral they are a complex function of maturity and in particular are not always monotoni cally increasing contrary to what one traditional view suggests our results may help explain the apparently conflicting empirical results found in the literature

the choice of call provision terms evidence of the existence of agency costs of debt an examination of the provisions of bond issues reveals that most bonds prohibit firms from calling the issue during the initial years after which time the bond can be called at the option of the firm a substantial number of firms however also reserve the right to call the issue during this initial period for purposes other than refinancing at a lower coupon rate the additional flexibility which accompanies the option of early redemption can be used to reduce the agency costs of debt associated with future investment opportunities informational asymmetry and the risk incentive problem using a sample of newly issued bonds statistical tests are performed to show that there are in fact differences between firms which do and do not reserve the right of early redemption this paper shows that these differences provide empirical evidence which is consistent with the hypothesis that firms use the option of early redemption to reduce agency costs one of the decisions which a firm must make when it floats a bond issue concerns the use of a call provision if a call provision is included in the bond then the terms of the call provision must be specified such as the years to the first call the initial call price the call price in subsequent years and the circumstances under which a call provision can be used previous work in the area of call provisions focused on fluctuations in interest rates as the reason for their existence it was shown by krause 12 however that in an efficient capital market any call provision decision based on interest rate uncertainty is irrelevant recent work in agency theory has shown that the existing contractual relationships between bondholders and stockholders may not be a zero sum game under these circumstances such financing decisions as capital structure debt maturity and call provisions may not be irrelevant an examination of the call provisions of currently outstanding bond issues reveals an institutional feature which is often overlooked many bonds have a standard call provision which restricts the firm from calling the issue for a stated number of years followed by a period during which firms have the option to call the bond at a stated call price another group of bond issues however contain a two tiered type of call provision which allows the corporation to call the bond for purposes other than refinancing at a lower coupon rate during the initial years of the life of the bond after this initial period the firm has the option of calling the bond issue for any purpose

flexible inflation forecast targeting evidence from canada we test whether the bank of canada pursues a flexible inflation forecast target one that weights output growth as well as inflation for the period 1996 2007 we find evidence that the bank did effectively pursue such a target over the forecast horizon of 12 to 18 months we find the relative weight that the bank gives to output growth in its target to be positive and statistically significant within the range of 0 2 to 0 4 resume la poursuite de cibles de prevision d inflation flexibles resultats pour le canada on met au test la proposition a savoir si la banque du canada poursuit une cible flexible de prevision d inflation une cible qui tient compte de la croissance du produit tout autant que l inflation pour la periode 1996 2007 les resultats montrent que la banque a poursuivi une cible sur un horizon de prevision de 12 a 18 mois on montre que la ponderation relative que la banque donne a la croissance du produit dans son ciblage est positive et statistiquement significative dans l eventail entre 0 2 et 0 4

safeguards and retaliatory threats abstract this is the first empirical article to analyze the response of shareholders to the threat of retaliatory tariffs authorized by the world trade organization wto we use event study methodology to gauge the impact of european union eu retaliatory threats stemming from the 2002 imposition of u s steel safeguards results indicate that the u s stock returns of firms slated for wto authorized tariffs reacted negatively to the announcements signaling an increased likelihood of retaliation shareholders also generally responded positively to the early cancellation of the safeguards which removed the risk of retaliation industry level analysis indicates that producers of apparel tobacco and transportation equipment were particularly affected by the threat of retaliatory tariffs second stage estimates suggest that retaliatory threats have a more negative impact on firms with a higher export share to the eu greater profit growth and low research and development intensity

callable bonds reinvestment risk and credit rating improvements role of the call premium we identify the call premium in nonconvertible callable bonds as an effective contracting provision to address agency conflict due to reinvestment risk and credit rating improvements we analyze 4 495 bonds issued between 1980 and 2012 when interest rates are high a majority of investment grade issues and almost the entire subset with long maturities 20 years include a call premium when interest rates are low virtually all investment grade issues with long and short maturities are callable at par high yield issues are limited to short maturities by about 4 1 they include a call premium regardless of interest rate levels

the relative tax benefits of alternative call features in corporate debt this paper examines the differential tax treatment of the borrower and lender at the time debt is called as a potential explanation for the widespread existence of call provisions in corporate debt this tax effect alone cannot explain the standard call feature because greater tax benefits may be derived for bonds callable at market prices the equilibrium implications of the model allowing for tax arbitrage opportunities both at the corporate level and the individual level also are considered

fiscal flows in the united states and canada lessons for monetary union in europe regional flows of federal taxes and transfers within the united states and canada are used to analyze long term fiscal flows the redistributive element and short term responses to regional business cycles the stabilization element in the united states long run flows amount to 22 cents in the dollar while the stabilization effect is 31 cents in the dollar in canada the redistributive effect is larger 39 cents and the stabilization effect smaller 17 cents federal flows appears to depend on the institutional structure of the country concerned however in both countries the redistributive element is considerably larger than the amounts involved in the ec structural funds program as for stabilization national fiscal policies in the ec appear to have been as effective as federal governments in the united states and canada in cushioning shocks to incomes

does limited punishment limit the scope for cross retaliation this paper analyzes two prominent institutional rules in the international trading system a limited cross retaliation rule characterized by the understanding on rules and procedures governing the settlement of disputes dsu article 22 3 and a limited punishment rule characterized by the general agreement on tariffs and trade gatt article xxviii in general both rules are designed to limit the countermeasures upon a violation however the former rule specifies the limits of composition in retaliation whereas the latter one designates the limits of retaliation magnitude we show that albeit seemingly unrelated the limited cross retaliation rule complements the limited punishment rule in permitting greater trade liberalization specifically we show how the limited cross retaliation rule also helps limit the incentives to violate the trade agreement when the limited punishment rule prevails jel f13 k33 c73

debt financing under asymmetric information the authors analyze the optimal design of debt maturity coupon payments and dividend payout restrictions under asymmetric information they show that if the asymmetry of information is concentrated around long term cash flows firms finance with coupon bearing long term debt that partially restricts dividend payments if the asymmetry of information is concentrated around near term cash flows and there exists considerable refinancing risk firms finance with coupon bearing long term debt that does not restrict dividend payments finally if the asymmetry of information is uniformly distributed across dates firms finance with short term debt

the march of an economic idea protectionism isn t counter cyclic anymore conventional wisdom holds that protectionism is counter cyclic tariffs quotas and the like grow during recessions while that may have been a valid description of the data before the first world war it is now inaccurate since the second world war protectionism has not been counter cyclic tariffs and non tariff barriers simply do not rise systematically during downturns i document this new stylised fact with a panel of data covering over 180 countries and 40 years using over a dozen measures of protectionism and six of business cycles i test and reject a number of potential reasons why protectionism is no longer counter cyclic a diagnosis of exclusion leads me to believe that modern economics may well be responsible for the decline in protectionism s cyclic behaviour economists are more united in their disdain for protectionism than virtually any other concept this in turn leaves one optimistic that the level of protectionism will continue to decline along with its cyclicality andrew k rose

auctioning countermeasures in the wto we offer a first formal analysis of auctioning retaliation rights within the wto we show that the auctions exhibit externalities among bidders and we characterize equilibrium bidder behavior under alternative auction formats if the violating country is prevented from bidding to retire the right of retaliation against it then the possibility of auction failure arises whereby no bids are made despite positive valuation by bidders if the violating country is instead permitted to bid then auction failure is precluded and indeed the right of retaliation is always retired we evaluate these different auction formats from normative revenue compliance efficiency standpoints

the determinants of the maturity of corporate debt issues we document the determinants of the term to maturity of 7 369 bonds and notes issued between 1982 and 1993 our main finding is that large firms with investment grade credit ratings typically borrow at the short end and at the long end and of the maturity spectrum while firms with speculative grade credit ratings typically borrow in the middle of the maturity spectrum this pattern is consistent with the theory that risky firms do not issue short term debt in order to avoid inefficient liquidation but are screened out of the long term debt market because of the prospect of risky asset substitution traditionally capital structure research has focused on how much of a firm s future cash flows should be paid out to debtholders instead of equityholders an equally important issue is when future cash flows should be paid out to debtholders a firm that finances its projects with short term debt risks serious financial difficulty if the debt cannot be extended similarly a firm that finances its activities with long term debt can sacrifice profits by needlessly risking mismanagement of resources after cash flows are returned from investments but before they are due to debtholders this study investigates the factors that firms consider when choosing the maturity of their liabilities we document the determinants of the maturity of 7 368 public debt issues made by u s corporations between 1982 and 1993 our empirical tests are based on existing theoretical models that relate the maturity of a firm s borrowings to the riskiness of its cash flows the time until investments pay off the quality of information held by outsiders the expected

multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

addressing global environmental externalities transaction costs considerations is there a way to understand why some global environmental externalities are addressed effectively whereas others are not the transaction costs of defining the property rights to mitigation benefits and costs is a useful framework for such analysis this approach views international cooperation as a contractual process among country leaders to assign those property rights leaders cooperate when it serves domestic interests to do so the demand for property rights comes from those who value and stand to gain from multilateral action property rights are supplied by international agreements that specify resource access and use assign costs and benefits including outlining the size and duration of compensating transfer payments and determining who will pay and who will receive them four factors raise the transaction costs of assigning property rights i scientific uncertainty regarding mitigation benefits and costs ii varying preferences and perceptions across heterogeneous populations iii asymmetric information and iv the extent of compliance and new entry these factors are used to examine the role of transaction costs in the establishment and allocation of property rights to provide globally valued national parks implement the convention on the international trade in endangered species of wild fauna and flora execute the montreal protocol to manage emissions that damage the stratospheric ozone layer set limits on harvest of highly migratory ocean fish stocks and control greenhouse gas emissions jel d23 p14 q22 q51 q54 q58

the political economy of administered protection trade restrictions are hardly ever voted directly by congress though the threat of direct congressional action is frequently present pressure for protection is usually applied through the major instruments for the administrative regulation of imports the antidumping and countervailing duty procedures and the escape clause mechanism in this paper we will examine these instruments for the administrative regulation of imports the form of the paper is not novel a theory of how these mechanisms work is developed then operational implications of this theory are deduced and tested over the record of countervailing duty antidumping and escape clause cases decided from 1975 through 1979 this is the period over which the trade act of 1974 was in force because the nature of these mechanisms is relatively unfamiliar a relatively large amount of institutional information is provided

domestic policies national sovereignty and international economic institutions to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world this question is at the center of the debate over the future role of the wto formerly gatt in the realm of labor and environmental standards in this paper we establish that the market access focus of current wto rules is well equipped to handle the problems associated with choices over labor and environmental standards in principle with relatively modest changes that grant governments more sovereignty not less these rules can deliver globally efe cient outcomes i introduction to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world at a broad level this question probes the limits of any international economic institution whether geared toward real or e nancial concerns that is designed to promote global efe ciency while respecting national sovereignty naturally the answer depends upon the particular problem that the institution is meant to solve in other words the answer depends upon the inefe ciency that would arise under unilateral policy choices at a more specie c level this question is at the center of the debate concerning the appropriate scope of the world trade organization wto formerly gatt recently member countries have considered ways to broaden the wto s orientation beyond conventional trade policy measures to include labor and environmental standards there are now initiatives to introduce the issue of labor standards directly onto the negotiating agenda of the wto with the purpose of creating a wto social clause the social clause would specify a set of minimum international labor standards and then permit restrictions to be placed against imports from countries not complying with these minimum standards with regard to environmental policies a wto committee on trade and environment has been established to identify the relationships between trade and environmental measures and to

the wto as a mechanism for securing market access property rights implications for global labor and environmental issues can the world trade organization wto contribute to the attainment of sound labor and environmental policies an answer requires an understanding of wto rules we argue that the purpose of wto rules is to create a negotiating forum where governments can exchange secure market access commitments from this perspective we argue that supporters of sound trade labor and environmental policies can benefit from a well functioning wto because facilitating trade liberalization and preventing race to the bottom regulatory chill problems go hand in hand and each is accomplished by maintaining secure property rights over negotiated market access commitments

the optimality of call provision terms there is substantial variation in fixed price call provision terms call price premium and call protection i investigate determinants of call price call protection and estimated call option value

determinants of business cycle comovement a robust analysis abstract this paper investigates the determinants of business cycle comovement between countries our dataset includes over 100 countries both developed and developing we search for variables that are robust in explaining comovement using the approach of leamer amer econom rev 73 1983 31 variables considered are i bilateral trade between countries ii total trade in each country iii sectoral structure iv similarity in export and import baskets v factor endowments and vi gravity variables we find that bilateral trade is robust however two variables that the literature has argued are important for business cycles industrial structure and currency unions are found not to be robust

u s trade threats rhetoric or war working paper 95 7 the international agricultural trade research consortium is an informal association of university and government economists interested in agricultural trade its purpose is to foster interaction improve research capacity and to focus on relevant trade policy issues it is financed by united states department of agriculture ers fas and csrs agriculture canada and the participating institutions

optimal monetary and fiscal policy in a currency union we lay out a tractable model for the analysis of optimal monetary and fiscal policy in a currency union the monetary authority sets a common interest rate for the union whereas fiscal policy is implemented at the country level through the choice of government spending in the presence of country specific shocks and nominal rigidities the policy mix that is optimal from the viewpoint of the union as a whole requires that inflation be stabilized at the union level by the common central bank whereas fiscal policy has a country specific stabilization role one beyond the efficient provision of public goods

on the economic success of gatt wto dispute settlement what features of the dispute settlement process help governments live up to their trade liberalization commitments exploiting data on gatt wto trade disputes initiated and completed between 1973 and 1998 this paper identifies economic and institutional determinants that help defendant governments commit to liberalizing trade we find substantial evidence consistent with the theory that power measures including threat of retaliation by the plaintiff yield credibility to allow defendant governments to live up to their commitments we find only limited evidence however that particular procedural or institutional features beyond the basic gatt wto dispute settlement forum itself contributed to the successful economic resolution of trade disputes

on the relevance of debt maturity structure in this paper we present a tax induced framework to analyze debt maturity problems we show that under some modifications of the existing u s tax code debt maturity is irrelevant even in the presence of taxes and bankruptcy costs that yield an optimal capital structure if this restrictive structure is relaxed and assuming the miller 15 equilibrium does not prevail tax reasons would usually imply the existence of an optimal debt maturity structure if there exists a gain from leverage then an increasing term structure of interest rates adjusted for default risk results in long term debt being optimal a decreasing term structure under similar circumstances renders short term debt optimal in the absence of agency costs a miller 15 type result emerges at equilibrium and irrelevance prevails we also argue that agency costs could again reverse the irrelevance and imply a firm specific optimal debt maturity structure there has been extensive discussion in the literature concerning the existence of an optimal debt maturity structure kraus 13 states without proof that efficient capital markets preclude the existence of an optimal debt maturity stiglitz 20 demonstrates the irrelevance of debt maturity but in an economic environment in which the entire financing decision is irrelevant due to the absence of taxes and bankruptcy costs in contrast morris 16 argues that the issuance of short term debt can reduce the risk to stockholders and thereby increase equity value if the covariance between the net operating income and future interest rates is positive this result by morris is obtained even in the absence of taxes and when there is no probability of default the discrepancy between morris and stiglitz arises because morris uses the bogue and roll 31 multiperiod capital asset pricing model to incorporate uncertain future interest rates which implicitly assumes that investors cannot diversify away intertem

what makes countries initiate wto disputes on food related issues abstract this paper analyses relevant determinants for the probability to initiate a dispute on policy measures under the world trade organization wto dispute settlement system the empirical analysis differs from existing assessments by focusing on agro food related disputes and provides a more in depth analysis of specific country and sectoral characteristics not considered in previous studies contrary to recent analyses of overall trade disputes the results show that some determinants such as legal capacity and monetary means are not statistically significant own protectionist behaviour endured protectionism and the duration of wto membership however could be identified as relevant determinants with the expected direction of impact

cooperation in wto s tariff waters this paper examines the extent to which tariff cooperation is observed among world trade organization members with the help of a simple political economy model we show that tariffs are positively

measuring regional effects of monetary policy in canada this article measures monetary policy shocks and examines whether the effects of such shocks have differential regional effects in canada we identify three possible sources of regional effects differences in the importance of interest sensitive industries differences in the contribution of exports to output and differences in the proportion of small relative to large firms using the overnight interest rate as the instrument of monetary policy we present impulse responses of industry output from a recursive vector autoregression which incorporates a cointegrating relation the results show that manufacturing and primary industries are the most interest sensitive we conduct impulse responses of provincial employment from a monetary contraction the results show that newfoundland and prince edward island pei primary industry based provinces are strongly and adversely affected by a monetary contraction manitoba saskatchewan and alberta also primary based are also affected ontario which is man

trade policy under the gatt wto empirical evidence of the equal treatment rule a fundamental difference between multilateral trade agreements like the gatt and wto and a preferential agreement is the multilateral agreements inclusion of a most favoured nation principle though mfn requires that members implement policies that provide equal treatment to all gatt wto countries how far do members actually follow the mfn principle when so required we empirically investigate a sample of gatt wto trade disputes and the effect of successful dispute settlement negotiations on the disputed product trade of third country exporters to the defendant country we document evidence of trade liberalization consistent with defendant countries successfully applying the equal treatment rule jel classification f13 politique commerciale sous le regime gatt omc resultats empiriques de la regle du traitement equivalent une difference fondamentale entre les accords commerciaux multilateraux comme le gatt ou l omc et un accord preferentiel est que dans le premier cas on fait appel au principe de la nation la plus favorisee meme si ce principe requiert que les membres mettent en place des politiques qui assurent un traitement equivalent a tous les pays de l accord gatt omc reste a savoir jusqu a quel point les membres se soumettent a ce principe quand c est requis ce memoire etudie la question en faisant enquete sur un echantillon de disputes commerciales autour d accords de type gatt omc et sur l effet du succes des negociations dans la resolution de conflit sur le commerce du produit au caeur de la dispute en provenance de pays tiers exportant vers le pays qui se defend on montre que les resultats de la liberalisation du commerce sont consistants avec l application de la regle du traitement equivalent par les pays qui se defendent

is canada an optimal currency area an inflation targeting perspective we propose a method based on the currency union model of gali and monacelli 2008 to determine whether a region within an existing currency area belongs in the currency union the method involves assessing the predictability of regional inflation rates at medium term horizons we apply the method to the canadian provinces and find that for all but alberta there is little evidence of costs in terms of inflation arising from national monetary policy for alberta the evidence suggests that they are not as well served by the inflation targeting framework and that a more flexible policy environment might improve inflation outcomes

what is wrong with taylor rules using judgment in monetary policy through targeting rules it is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule e ither ageneral targeting rule explicit objectives for monetary policy or a specific targeting rule a criterion for the forecasts of the target variables to be fulfilled essentially the equality of the marginal rates of transformation and substitution between the target variables targeting rules allow the use of judgment and extramodel information are more robust and easier to verify than optimal instrument rules and they can nevertheless bring the economy close to the socially optimal equilibrium

the call sinking fund and term to maturity features of corporate bonds an empirical investigation do bond issuing firms attempt to choose the call sinking fund and term to maturity features of bonds to improve shareholder wealth this paper develops and tests two hypotheses about the determinants of bond features using a conditional logistic model the model is estimated on a sample of bonds issued between 1982 and 1986 model estimates show that a bond s call sinking fund and term to maturity features are statistically related to the issuing firm s retention ratio ratio of convertible to long term debt two year change in net operating income and whether the firm is listed on the nyse and included in the s p400 these findings support the view that firms financing highquality projects but facing information asymmetries choose shorter term medium term callable bonds with and without the sinking fund feature

identifying a policymaker s target an application to the bank of canada we develop a new way to test hypotheses about policymakers targets and imple ment that test for canadian monetary policy for example if the bank of canada is targeting a 2 per cent inflation rate and if the bank s instrument takes eight quarters to affect inflation then deviations of inflation from 2 per cent should be uncorrelated with the bank s informa tion set lagged eight quarters we show that there was a major change in the bank s objec tives near the time when formal inflation targets were announced and that the bank has indeed been targeting inflation since then jel code e52 e61

regional income fluctuations common trends and common cycles this paper investigates trend and cycle dynamics in per capita income for the major u s regions during the 1956 1995 period cointegration and serial correlation common features information are used in jointly decomposing the series into trend and cycle components we find considerable differences in the volatility of regional cycles controlling for differences in volatility we find a great deal of comovement in the cyclical response for all regions but the far west possible sources underlying differences in regional cycles are explored such as the share of a region s income accounted for by manufacturing defense spending as a proportion of a region s income oil price shocks and the stance of monetary policy somewhat surprisingly we find that the share of manufacturing in a region seems to account for little of the variation in regional cycles relative to national cycles but manufacturing share differentially affects trend growth for four of the seven regions studied

flattening of bond yield curves for long maturities the paper presents a theoretical proof that flattening of yield curves for par bonds is inevitable for long maturities this proof implies that behavioral explanations of flattening are unnecessary the proof also implies that the use of yields to maturity of couponbearing bonds to estimate the true term structure as well as forward rates for long maturities has potentially infinite bias suggesting that a greater effort should be made to directly estimate the true term structure in empirical work empirically observed bond yield to maturity curves have consistently been found to become flat for long maturities as evidenced by the empirical work of durand 6 7 8 malkiel 15 and the treasury bulletin 25 a concise summary of this evidence is contained in malkiel 15 he presents three dimensional graphs of corporate bond yield curves from 1900 to 1965 15 pp 8 9 and two dimensional graphs of yield curves for u s government securities for the period 1953 66 15 p 13 both of these show that flattening of yield curves occurs consistently for long maturities more recent u s government bond yield curves in the treasury bulletin exhibit a similar flatness for long maturities malkiel 15 considered flattening of yield curves for long maturities to be an important desiderata that a theory of the term structure must fulfil he said that a term structure theory must account for the pervasive tendency of the yield curve to level out as term to maturity increases and to develop what is called a shoulder irrespective of the general shape in the early maturities slopes with large absolute values occur only in the early maturities 15 p 16 malkiel has suggested that the shape of yield curves depends on the sensitivity of bond price to changes in interest rates according to malkiel s viewpoint if long term bonds of different maturities have essentially the same price sensitivity to interest rate changes yield curves would tend to be flat for long maturities in another viewpoint lutz 14 has said that the flattening of yield curves is the result of constant long term forward rates for long maturities this view would be justified if investors would use the same forecasted rate as the best predictor of all distant rates because of the uncertainties attached to expectations of future rates in different but distant future periods the major innovative result of our paper is a formal proof that flattening of yield curves for par bonds is inevitable for long maturities the power of this proof is that no assumptions are required about forward rates zero coupon

an optimum currency area odyssey abstract the theory of optimum currency areas was conceived and developed in three highly influential papers written by mundell 1961 mckinnon 1963 and kenen 1969 those authors identified characteristics that potential members of a monetary union should ideally possess in order to make it feasible to surrender a nationally tailored monetary policy and the adjustment of an exchange rate of a national currency we trace the development of optimum currency area theory which after a flurry of research into the subject in the 1960s was relegated to intellectual purgatory for about 20 years we then discuss factors that led to a renewed interest into the subject beginning in the early 1990s milton friedman plays a pivotal role in our narrative friedman s work on monetary integration in the early 1950s presaged subsequent optimum currency area contributions mundell s classic formulation of an optimal currency area was aimed in part at refuting friedman s strong case for floating exchange rates and friedman s work on the role of monetary policy had the effect of helping to revive interest in optimum currency area analysis the paper concludes with a discussion of recent analytical work using new keynesian models which has the promise of fulfilling the unfinished agenda set out by the original contributors to the optimum currency area literature that is providing a consistent framework in which a country s characteristics can be used to determine its optimal exchange rate regime

regional redistribution and stabilization by the center in canada france the uk and the us abstract this paper re examines earlier estimates of regional redistribution and stabilization through the central government budget in the us and produces new estimates of this redistribution and stabilization in the us canada france and the uk the new estimates rest on panel data econometrics and an adherence to certain accounting principles that have occasionally been violated in the past as a result of the accounting the peak estimates for the us and canada in the earlier literature are never attained regional stabilization of personal income through the central government budget emerges as close to 20 in the us france and the uk but only 10 to 14 in canada in case of gross product instead of personal income accounting regional stabilization is closer to 10 in the us as regards france and the uk the use of panel data econometrics proves essential

callable bonds a risk reducing signalling mechanism the theory of financial economics has failed to distinguish advantages of callable bonds from those of short term debt this paper shows that either type of borrowing can signal a firm s better prospects but that short term debt does so at the cost of weakened risk sharing with capital markets by issuing either equity or long term non callable debt a firm with poor investment opportunities will not pool its prospects with those of a better firm but equity produces superior risk sharing perhaps this explains the almr ost complete absence of long term non callable bonds from observed corporate capital structures financial theory has found only moderate success in explaining the routine inclusion of call provisions among the covenants of corporate bonds in the absence of market imperfections or incompleteness the incremental compensation promised to bondholders should exactly offset the value of the call provision retained by equityholders indifference should obtain 1 nevertheless it is hard to accept indifference as an explanation given the near universality of call provisions in corporate bond contracts in this paper we argue that in the presence of asymmetric information about investment quality corporate managers can signal their firm s better prospects by issuing bonds that include call provisions our major result shows that this signalling mechanism can be more attractive to risk averse managers than would be the choice of short term debt which could also serve to signal furthermore we demonstrate that non callable corporate debt is a dominated security that is both it and equity signal bad news but equity provides risk sharing this finding helps to explain the relative absence of long term non callable debt from corporate financial markets previous attempts to explain the prevalence of call provisions in corporate bond contracts fall into four categories two categories involve pure wealth transfers from bondholders to stockholders in these constant sum environments a gain to one group constitutes a loss to the other in the first category managers possess private information with regard to future interest rate movements issuing callable bonds will capture gains for stockholders when anticipated drops