the classification and performance of alternative exchange rate systems abstract owing to dissatisfaction with the imf s de jure classification of exchange rate regimes a substantial literature has emerged presenting de facto classifications of exchange rate systems and using the latter classifications to compare performances of alternative regimes in terms of key macroeconomic variables this paper critically reviews the literature on de facto regimes in particular the paper 1 describes the main methodologies that have been used to construct de facto codings 2 surveys the empirical literature generated by de facto regime codings and 3 lays out the problems inherent in constructing de facto classifications the empirical literature is found to yield few robust findings we argue that the as yet unfulfilled objective of this literature and the major research agenda for the future in this area lies in the need of a more thorough investigation of the degree of monetary policy independence without relying exclusively on movements in exchange rates an agenda the attainment of which is made especially challenging because of the lack of comprehensive and reliable data on reserves and interest rates

interlinked contracts and moral hazard in investment abstract in agricultural tenancy arrangements the tenant is often required to undertake effort aimed at maintaining and improving the productive stocks this paper investigate the design of contracts which induce optimal investment of such effort it is found that a long term contract which interlinks tenancy with a credit agreement is optimal in equilibrium the tenant obtains credit from the landlord at a rate of interest below the market and is perpetually indebted to the landlord

cost sharing arrangements under sharecropping moral hazard incentive flexibility and risk this paper explains the rationale and describes the characteristics of cost sharing arrangements in rural developing economies focusing on the risk and incentive properties of alternative cost contracts and on their flexibility their ability to adapt to environmental changes it is shown that where labor inputs are difficult to monitor the rule that cost shares and output shares be equalized will not hold and is not constrained pareto efficient and that cost sharing contracts have a decided advantage over contracts which specify the level of inputs whenever there are asymmetries of information regarding production technology between the landlord and the tenant

a theory of interlinked rural transactions this paper argues that the interlinking of labor output and credit contracts often observed in rural economies can be regarded as an attempt to improve allocative efficiency in the face of moral hazard it advances an economic explanation of the phenomenon which is rooted in the view that prevalent modes of transaction of which interlinked contracts are an example are shaped by technological considerations interlinking is shown to be an efficient economic response to unequally distributed information arising from the uncertainty which characterizes subsistence agriculture all pareto efficient allocations require a combination of wage cum output sharing with consumption credit contracts the analytical framework set up to demonstrate the results is used to examine the response of the contractual parameters to changes in i the returns to alternative occupations available to tenant laborers ii the cost of credit to the village economy and iii the riskiness of cultivation the analysis concludes that public policy to alleviate rural poverty must recognize the relationships between technological considerations and modes of transaction in the absence of a complete set of markets

pegged exchange rate regimes a trap this paper studies the empirical and theoretical association between the duration of a pegged exchange rate and the cost experienced upon exiting the regime we confirm empirically that exits from pegged exchange rate regimes during the past two decades have often been accompanied by crises the cost of which increases with the duration of the peg before the crisis we explain these observations in a framework in which the exchange rate peg is used as a commitment mechanism to achieve inflation stability but multiple equilibria are possible we show that there are ex ante large gains from choosing a more conservative not only in order to mitigate the inflation bias from the well known time inconsistency problem but also to steer the economy away from the high inflation equilibria these gains however come at a cost in the form of the monetary authority s lesser responsiveness to output shocks in these circumstances using a pegged exchange rate as an anti inflation commitment device can create a trap whereby the regime initially confers gains in anti inflation credibility but ultimately results in an exit occasioned by a big enough adverse real shock that creates large welfare losses to the economy we also show that the more conservative is the regime in place and the larger is the cost of regime change the longer will be the average spell of the fixed exchange rate regime and the greater the output contraction at the time of a regime change

trust interlinking transactions and credit in the industrial district an essential feature of the industrial district is trust among individuals and firms within it this paper focuses mainly on trust based on investments in building up a good reputation that is a personal capital that can even substitute for collateral in obtaining credit informal credit often linked to other transactions and especially subcontracting is therefore an important way of financing economic development in the industrial district moreover the importance of trust as personal capital gives rise to a double financial intermediation in the industrial district this double intermediation constitutes a device to reduce information problems that are usually responsible for credit rationing c 1994 academic press inc copyright 1994 by oxford university press

theories of share tenancy a critical survey for the past 2 decades the problems of agricultural tenancy have attracted a great deal of attention not only from agricultural economists but also from economists in general as a typical example of agencyprincipal contract relations despite the prolific growth of literature both theoretical and empirical there has been little convergence in opinions on tenancy contracts the divergence has been especially great on the understanding of the causes and the effects of sharecropping tenancy much confusion underlying the widely divergent perspectives has stemmed from partial treatments of contractual choice which unduly limit the optimizing behavior of contracting parties and the options of contract forms this essay aims at clarifying the sources of the confusion by reviewing the past literature in light of the more general theory of agency principal relations the agency theory in order to examine the problems of various theoretical models in a unified framework in section ii we first develop the basic framework of a general model of tenancy contract in section iii we clarify in terms of the general model contradictions latent in the traditional marshallian theory which asserts that share tenancy is inefficient because of the disincentive effect of cropsharing on the tenant s work effort in section iv we attempt to show that recent efforts to reconstruct the theory based on the traditional assumption have not yet been quite successful section v draws implications and testable hypotheses from more general theories incorporating the aspects of risk and uncertainty section vi tests allocational and distributional implications of those alternative hypotheses based on the summary of evidence col

survey measures of expected u s inflation of real interest rates and cash flows for decisions concerning investment expenditures international capital flows and exchange rate movements hinge in large part on expected real yield differentials across countries the federal reserve needs reliable measures of expected inflation to formulate and gauge the thrust of monetary policy in fact inflation expectations have become more important to the fed given the diminished stability of the link between the monetary aggregates and gdp expenditures since the early 1980s and the greater role which has been thrust upon expected real short term interest rates in the implementation of federal reserve policy the issue of rationality of inflation expectations that is the extent to which agents form expectations without making systematic mistakes in their beliefs about what inflation will be is important if inflation expectations are formed rationally labor and financial markets will strongly tend to neutralize the potential redistributive effects of inflation over time financial capital will flow efficiently within and across national borders moreover some of the stronger claims of new classical macroeconomics like the claim that only unexpected monetary policy actions will

progress in behavioral game theory i s game theory meant to describe actual choices by people and institutions or not it is remarkable how much game theory has been done while largely ignoring this question the seminal book by von neumann and morgenstern the theory of games and economic behavior was clearly about how rational players would play against others they knew were rational in more recent work game theorists are not always explicit about what they aim to describe or advise at one extreme highly mathematical analyses have proposed rationality requirements that people and firms are probably not smart enough to satisfy in everyday decisions at the other extreme adaptive and evolutionary approaches use very simple modelsmostly developed to describe nonhuman animals in which players may not realize they are playing a game at all when game theory does aim to describe behavior it often proceeds with a disturbingly low ratio of careful observation to theorizing this paper describes an approach called behavioral game theory which aims to describe actual behavior is driven by empirical observation mostly experiments and charts a middle course between over rational equilibrium analyses and under rational adaptive analyses the recipe for behavioral game theory i will describe has three steps start with a game or naturally occurring situation in which standard game theory makes a bold prediction based on one or two crucial principles if behavior differs from interested readers familiar with game theory should read crawford 1997 whose approach is more eclectic than mine he concludes p 236 that most strategic behavior can be understood via a synthesis that combines elements from each of the leading theoretical frameworks traditional game theory evolutionary game theory and adaptive learning with a modicum of empirical information about behavior behavioral game theory adds psychological interpretations to this synthesis

interlocking transactions obstacles precursors or instruments of agrarian capitalism abstract rural labor arrangements often change rapidly and in ways that prevailing theories cannot explain explicit understanding of the exercise of power in rural society sheds considerable light on how and why rural labor arrangements change in the course of economic development this paper shows how different labor tying arrangements embody exclusionary mechanisms that can serve as instruments of both labor management and social control macro political and economic conditions shape the ways in which these mechanisms operate and are in turn influenced by them viewing labor arrangements in this way helps resolve problems confronted by the prevailing theories and allows for a broader understanding of dynamic processes

political influence on the central bank international evidence political influence on the central bank is measured bere by looking at the probability that a central bank governor will be replaced shortly after a political change of government the governor changes about half the time witbin six months of a nonconstitutional or other radical change of government a military coup or a restoration of democracy the governor is much less likely to change within six months following a routine change in the head of government about one fourth of the time in developing countries and one tenth in industrial countries these indicators vary across countries and correlate statistically with inflation and its variability and with real growth and real interest rates differences in the vulnerability of the central bank to political instability in political instability itself and in central bank turnover in nonpolitical periods seem to be a major part of the explanation for why developing countries have on average higher and more variable inflation than industrial countries do

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

the effectiveness of monetary policy anchors firm level evidence analyses of monetary policy posit that exchange rate pegs inflation targets and central bank independence can help anchor private sector inflation expec tations yet there are few direct tests of this argument we offer cross national micro level evidence on the effectiveness of monetary anchors in controlling private sector inflation concerns using firm level data from eighty one countries approximately 10 000 firms we find evidence that international anchors exchange rate commit ments correlate significantly with a substantial reduction in private sector concerns about inflation while domestic anchors inflation targeting and central bank inde pendence do not our conjecture is that private sector inflation expectations are more responsive to exchange rate anchors because they are more transparent more con straining and more costly than domestic anchoring arrangements the literature on monetary policy highlights the role of monetary institutions in stabilizing private sector inflation expectations central bank independence cbi inflation targeting it and fixed exchange rates pegs are widely viewed as insti tutions that have the capacity to mitigate private sector concerns that policymak ers will exploit them after they have locked in their price wage and investment decisions while other empirical research explores the institutional correlates of inflation and its variability yielding mixed results we use firm level data in our study to directly assess the impact of monetary anchors on private sector inflation concerns we find evidence that pegs mitigate firm owners concerns with infla tion but that domestic anchors such as it and cbi are uncorrelated with our micro indicators of inflation expectations considerable research has investigated the use of it cbi and pegs as institu tions that establish monetary policy credibility whereas these anchors are expected

central bank independence and output variability abstract the benefit of greater central bank independence is the reduction in inflation that should result from the mitigation of a country s time consistency problem the cost of greater independence is the loss of discretionary monetary policymaking and consequent increase in output variability empirically however there is no correlation between output variability and central bank independence a possible explanation for this lack of correlation is that countries which are more likely to have lower output variability are also more likely to choose to have an independent central bank this hypothesis is tested using data for 44 countries while the evidence is weakly consistent with this hypothesis this does not seem sufficient to explain the zero correlation between output variability and central bank independence

convergence an experimental study of teaching and learning in repeated games nash equilibrium can be interpreted as a steady state where players hold correct beliefs about the other players behavior and act rationally we experimentally examine the process that leads to this steady state our results indicate that some players emerge as teachers those subjects who by their actions try to influence the beliefs of their opponent and lead the way to a more favorable outcome and that the presence of teachers appears to facilitate convergence to nash equilibrium in addition to our experiments we examine games with different properties from other experiments and show that teaching plays an important role in these games we also report results from treatments in which teaching is made more difficult in these treatments convergence rates go down and any convergence that does occur is delayed jel c70 c91 d83 d84

variation in central bank independence across countries some provisional empirical evidence in this paper seven hypotheses to explain variation in central bank independence across countries are tested the predictions based upon the theory that delegation of authority by politicians to the central bank is used as a commitment device are not supported central bank independence is not higher the larger the employment motivated inflationary bias the higher political instability or the larger the government debt central bank independence is positively related to historical inflation experience and negatively with political instability we do only find limited support for the view that countries with a universal banking system and countries whose central banks do not regulate financial institutions have more independent central banks

moral hazard and optimal commodity taxation abstract this paper demonstrates that in an economy with moral hazard and more than one commodity competitive equilibrium is not constrained efficient to correct the market failure differential commodity taxation is necessary a general optimal tax formula is derived and special cases of is discussed

features of experimentally observed bounded rationality abstract on the basis of experimental evidence reported in the literature the paper draws conclusions about the bounded rationality exhibited by human economic behaviour among the topics discussed are presentation effects caused by superficial analysis strategic reasoning and strategy construction based on reciprocity and fairness avoidance of circular concepts in step by step strategic reasoning ex post rationality and learning direction theory presence of both adaptive and analytic approaches to repeated decision tasks and the absence of quantitative expectations and optimization in typical repeated game strategies

the political economy of monetary institutions in recent decades countries have experimented with a variety of monetary institutions including alternative exchange rate arrangements and different levels of central bank independence political economists have analyzed the choice of these institutions emphasizing their role in resolving both the time inconsistency problem and dilemmas created by an open economy this first generation work however suffers from a central limitation it studies exchange rate regimes and central bank institutions in isolation from one another without investigating how one monetary institution affects the costs and benefits of the other by contrast the contributors to this volume analyze the choice of exchange rate regime and central bank independence together and in so doing present a second generation of research on the determinants of monetary institutions the articles incorporate both economic and political factors in explaining the choice of monetary institutions investigating how political institutions democratic processes political party competition and interest group pressures affect the balance between economic and distributional policy objectives

central bank independence and macroeconomic performance some comparative evidence this note uses information on a sample of sixteen oecd countries to assess the relationship between central bank independence and macroeconomic performance as previous work suggests politically controlled central banks are more likely to pursue policies that lead to high and variable inflation however the authors find little evidence that political control of central bank policy has any impact on measures of the level or variability of growth unemployment or the ex ante real interest rate copyright 1993 by ohio state university press

central bank independence an update of theory and evidence this paper reviews recent research on central bank independence cbi after we have distinguished between independence and conservativeness research in which the inflationary bias is endogenised is reviewed finally the various challenges that have been raised against previous empirical findings on cbi are discussed we conclude that the negative relationship between cbi and inflation is quite robust

moral hazard and marshallian inefficiency evidence from tunisia abstract we formalize the link between optimal cost sharing contracts and the production technology in the presence of moral hazard by appealing to several well known results from duality theory building on intuitions from the interlinkage literature we show that optimal contractual structure is determined by the i substitution possibilities that exist between different observable factor inputs as well as ii between these inputs and unobservable effort we endogenize contractual choice using landlord characteristics as instruments exploiting the fact that in our dataset landlords interact with several tenants and vice versa the approach is applied to an unbalanced plot level panel of cost sharing contracts in a tunisian village using a translog representation of the restricted profit function contractual terms are found to be a significant determinant of input use and therefore lead to marshallian inefficiency while the optimality of the underlying contractual structure is rejected

two fallacies concerning central bank independence this paper takes issue with two basic conclusions prevalent in the literature on central bank behavior first the paper argues that it is inappropriate to presume that central banks will in the absence of any precommitment technology necessarily behave in a discretionary fashion that implies an inflationary bias since there is no functional connection between average rates of money creation or inflation and policy responsiveness to cyclical disturbances it is entirely feasible for the bias to be avoided in other words there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any absolute precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it this abstract was borrowed from another version of this item

credit and sharecropping in agrarian societies this paper considers a model of linkage between land labor and credit transactions in the context of sharecropping the paper s objectives are a to derive and characterize the equilibrium in a model of a land scarce labour abundant economy under sharecropping given an infinitely elastic supply of identical sharecroppers at a reservation utility and b to demonstrate that in an imperfect market a landlord may offer credit to his tenant sometimes even at a subsidized rate of interest without necessarily insisting that the sharecropper borrow only from him precluding an involuntary linkage between credit and land transations it has been demonstrated that regardless of the presence or absence of linkage or any other control by the landlord as long as he can vary the size of the plot given to a tenant and there are enough potential tenants in equilibrium contracts a tenants utility under sharecropping will be the same as that which he could have obtained as a full time wage laborer this result implies that policies other than land reform will not affect the welfare of tenants

theory and misbehavior of first price auctions recent experimental evidence appears to reject simple nash equilibrium models of bidding behavior in first price auctions the author presents a methodological critique of this evidence existing tests have concentrated on deviations of subjects from predictions in the message space of the action bid deviations the author suggests that it is more natural to evaluate subject behavior in expected payoff space he concludes that the evidence against the simple models is not significant enough to warrant their rejection copyright 1989 by american economic association

the advantage of tying one s hands ems discipline and central bank credibility abstract it is often argued that the ems is an effective disciplinary device for inflation prone countries in europe since it forces the respective policy makers to pursue more restrictive monetary policies than they would otherwise it is not clear however why these countries should submit themselves to such discipline this paper argues that to answer this question appropriately one must consider that ems membership brings potentially large credibility gains policy makers in inflation prone countries the reason is that not only it attaches an extra penalty to inflation in terms of real appreciation but makes the public aware that the policy maker is faced with such penalty and thus helps to overcome the inefficiency stemming from the public s mistrust of the authorities

exchange rate regimes and inflation only hard pegs make a difference abstract using data from a large sample of developing countries from 1985 to 2001 we confirm that hard pegs currency boards or a shared currency reduce inflation and money growth there is no evidence that soft pegs confer any monetary discipline after other factors are controlled for inflation triggers regime switches under hard pegs monetary growth is unaffected by fiscal deficits or by inflation shocks under soft pegs as under floats increased fiscal deficits and positive inflation shocks are associated with higher monetary growth the apparently slower per capita output growth under hard pegs is explained by their geographical distribution jel classification f41

credit layering in informal financial markets abstract informal lenders with access to markets or capital often find it attractive to delegate loan provision to downstream lenders who have an information or enforcement advantage in dealing with particular borrowers in this paper we examine the conditions under which such an arrangement is preferred by two informal lenders a landlord and a merchant who compete in loan provision to tenant farmers differentiated by wealth we show that credit layering is preferred only when tenants are sufficiently poor in this case the trader lends to tenant farmers via a contract with their landlord otherwise only the trader lends as a consequence a pattern of borrowing emerges in which relatively wealthy tenants borrow from merchants while poor tenants borrow mainly from their landlords interlinkage between land and credit thus arises only for a subset of tenants and purely as a consequence of credit layering this pattern is shown to be supported empirically

double moral hazard and resale price maintenance incentives for resale price maintenance rpm are studied in a wholesaler retailer relationship in which both firms make a nonprice choice subject to moral hazard the best attainable contract has vertical externalities in both nonprice choices and the choice of consumers price if delegated to the retailer rpm controls the latter externality but interacts with the other externalities as well as a consequence either minimum or maximum vertical price fixing can be optimal in spite of a successive monopoly specification similar incentives exist for writing other variables into contract such as the capital input of the retailer

interlinked contracts an empirical study this study investigates the contractual relationship between farmers and sugar mills in colonial taiwan our investigation is based on a model of interlinked contracts which is adapted from gangopadhyay and sengupta 1987 the validity of our model s predictions is verified by analyzing a data set consisting of contracts between taiwan s cane farmers and sugar mills during the period of japanese occupation our data suggest that the contractual relationship is consistent with a second best scenario where the interest rates charged by sugar mills on cash loans to farmers are set in order to prevent diversion of funds to non production uses

international experiences with different monetary policy regimes any views expressed in this paper are those of the author only and not those of columbia university or the national bureau of economic research abstract this paper examines the international experiences with four basic types of monetary policy regimes 1 exchange rate targeting 2 monetary targeting 3 inflation targeting and 4 monetary policy with an implicit but not an explicit nominal anchor the basic theme that emerges from this analysis is that transparency and accountability are crucial to constraining discretionary monetary policy so that it produces desirable long run outcomes because the devil is in the details in achieving transparency and accountability what strategy will work best in a country depends on its political cultural and economic institutions as well as on its past history

on the credibility of alternative exchange rate regimes abstract most anti inflation plans have used a nominal exchange rate anchor even though many other variables can serve this role the conventional wisdom is that an exchange rate anchor imposes more macroeconomic discipline than other anchors though theory does not yet provide any clear reason why this is so we explain the link between an exchange rate anchor and discipline with a model that assumes that the public can monitor the nominal exchange rate more easily that it can the other variables in our model a barro gordon game of incomplete information with imperfect monitoring we show that serious stabilizers prefer more visible anchors such as the nominal exchange rate we also show that in some circumstances serious stabilizers will choose to fix the exchange rate even when fixed exchange rates have some costs such as diminished capabilities to respond to external shocks

what causes the failure of inflation stabilization plans abstract the paper discusses the causes of failure of inflation stabilization plans following a description of stylized facts of inflation stabilization a model of balance of payments crises is presented highlighting some of the main factors leading to the collapse of stabilizations empirical results obtained when estimating a binary probit model over a panel of 34 stabilizations identify real exchange rate appreciation lack of foreign reserves and government budget deficits as the main causes of failure of inflation stabilization plans this is consistent with the model presented in this paper with the stylized facts of stabilizations and with some of the models found in the literature

the impact of the great migration on mortality of african americans evidence from the deep south the great migration the massive migration of african americans out of the rural south to largely urban locations in the north midwest and west was a landmark event in u s our paper shows that this migration increased mortality of african americans born in the early twentieth century south this inference comes from an analysis that uses proximity of birthplace to railroad lines as an instrument for migration

introduction to experimental game theory the title experimental game theory refers to experiments whose goal is to learn about general principles of strategic behavior as opposed to the performance of specific institutions twenty five years ago it would have been startling to see experimental modifying game theory in this way or to find an entire issue of an economics journal devoted to game experiments if this now seems natural it is a tribute to the increasingly

a response to glazer and rosenthal we are most grateful to glazer and rosenthal for the attention they have paid to our work abreu and matsushima 1992a b c in the process of criticizing our mechanism they have provided an elegant exposition of it which usefully supplements our own efforts the criticisms themselves we feel are misplaced and based on a close reading but narrow interpretation of our results glazer and rosenthal seek to show that in our mechanisms the iterative removal of strictly dominated strategies is or indeed ought to be controversial in terms of conventional decision theory the iterative logic is impeccable when iterative deletion leads to a unique profile that profile is the unique rationalizable profile the unique nash equilibrium and so on of course the logic of iterative dominance entails common knowledge of rationality the theoretical coherence of this assumption has been questioned in the context of backward programming in extensive form games see luce and raiffa 1957 pp 80 81 rosenthal 1981 basu 1988 reny 1992a 1992b bonanno 1991 binmore 1987a 1987b and gul 1989 among others these paradoxes of common knowledge of rationality have been highlighted in stylized examples such as the finitely repeated prisoners dilemma and rosenthal s centipede game which in fact has been a seminal inspiration for this recent literature 2 but our mechanisms are simultaneous there is no opportunity to demonstrate irrationality strategic or otherwise and therefore no scope to rationalize iteratively dominated behavior from a decision theory perspective the glazer and rosenthal critique might therefore be viewed as an elaborate revival of the indefensible claim that players in a one short prisoners dilemma will choose not to confess because they are both better off doing so than by both playing their dominant strategies within the standard game theory paradigm there is really nothing more to be said before turning to issues of bounded rationality we note that the glazer and rosenthal critique is essentially premised on the existence of a countervailing focal point but what is a focal point the notion is notoriously vague and we are aware of no widely accepted definition 3 this is not to deny that in very simple and particular games certain behavior may be focal frequently focalness is identified with a pareto dominating equilibrium and this is the point of view glazer and rosenthal seem to adopt 4 this is implicit in their acknowledgement that when the social choice function does satisfy pareto optimality our objection loses much of its immediate

does central bank independence really matter new evidence for developing countries using a new indicator abstract this paper provides a new indicator for central bank independence cbi based on the turnover rate of central bank governors for 82 developing countries over the period 1980 1989 using this new indicator it is concluded that this proxy for cbi is related to inflation only if the high inflation countries are included in the sample the view that both cbi and inflation are caused by effective opposition towards inflation is not supported using both the extreme bound analysis and sala i martin s method we do not find evidence that cbi is robustly related to economic growth

globalization pressures and the state the worldwide spread of central bank independence the authors examine the impact of globalization on state structures in the specific instance of the central bank following the world system world society and neoinstitutional perspectives in sociology they assume that states are in cultural political and economic competition with each other thereby seeking to maintain their position and status frequently by adopting organizational forms or practices that make them isomorphic with their environment the authors predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade investment and multilateral lending increases they also model the cross national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role equivalent trade relationships between countries they find support for their hypotheses with information on 71 countries between 1990 and 2000

kicking the habit moving from pegged rates to greater exchange rate flexibility why do governments find it so difficult to move from pegged exchange rates to greater exchange rate flexibility i first establish that there is a problem to be solved that there are powerful incentives for greater flexibility deriving from changes in the international economic and financial environment but that policymakers find it difficult to engineer a smooth transition i offer practical suggestions and a framework under which the probability of a smooth transition can be maximised drawing examples from recent economic history i then attempt to understand the experience of selected countries which have undertaken this transition

abreu matsushima mechanisms experimental evidence abstract abreu matsushima mechanisms can be applied to a broad class of games to induce any desired outcome as the unique rationalizable outcome we conduct experiments investigating the performance of such mechanisms in two simple coordination games in these games one pure strategy equilibrium is focal we assess the efficacy of abreu matsushima mechanisms for implementing the other pure strategy equilibrium outcome abreu matsushima mechanisms induce some choices consistent with the desired outcome but more choices reflect the focal outcome moreover strengthening the mechanism has a perverse effect when the desired outcome is a pareto dominated risk dominated equilibrium journal of economic literature classification number c7

sharecropping and the interlinking of agrarian markets one of the often noted features of less developed agrarian economies is the existence of interlinkages among the land labor credit and product markets the landlord is often the supplier of credit he frequently purchases and markets the output of the tenant farmers and often sells raw materials and even consumption goods to his tenant farmers how can this phenomenon be explained what are the welfare consequences of attempts to restrict these practices which often seem to constitute restraints on free trade these are the questions to which this paper is addressed a general set of arguments applicable to both competitive and noncompetitive environments are presented to situations where all the terms of the contract are determined in an optimal way as well as to situations where many of the terms are specified institutionally section i examines interlinked credit and tenancy contracts section ii examines interlinked marketing and tenancy contracts section iii points out the possible interlinking between labor contracts and consumption goods markets and section iv presents the different equilibrium frameworks discussed in the paper such as monopoly monopsony competition and equilibria with surplus labor

prudence justice benevolence and sex evidence from similar bargaining games abstract most learning experiments involve repeated play of exactly the same situation and hence can not discriminate between learning to use a deductive principle and other forms of routine learning in this paper subjects confront a sequence of similar but not identical bargaining games all of which can be solved using the same deductive principles conventions based on these deductive principles emerge within 70 periods in 5 of 26 eight person cohorts we found no economically significant differences between all male and all female cohorts journal of economic literature classification numbers c72 c78 c92 d83

endogenous emergence of credit markets contracting in response to a new technology in ghana abstract access to credit is important for the productivity and overall welfare of farmers in developing countries we present a theoretical framework which shows that a change in the mode of shipping from air to sea in the ghanaian pineapple industry made it profitable for pineapple exporters to provide myopic farmers with both in kind loans to improve productivity and cash loans for consumption smoothing despite being unable to monitor farmers or enforce repayment the innovative theoretical result is that providing farmers with additional cash loans can enforce greater input use without compromising repayment we provide evidence in the form of a case study documenting the dramatic rise of informal credit through contract farming after the switch to sea freight between 1996 and 2001 using this anecdote we argue that credit arrangements can arise spontaneously absent non market interventions to meet market needs even in the absence of proper legal protections for creditors

laboratory experimentation in economics six points of view 1 introduction and overview alvin e roth 2 bargaining phenomena and bargaining theory alvin e roth 3 equity and coalition bargaining in experimental three person games reinhard selten 4 the psychology of choice and the assumptions of economics richard thaler 5 hypothetical valuations and preference reversals in the context of asset trading marc knez and vernon l smith 6 economics according to the rats and pigeons too what have we learned and what can we hope to learn john h kagel 7 dimensions of parallelism some policy applications of experimental methods charles r plott

new directions for modelling strategic behavior game theoretic models of communication coordination and cooperation in economic relationships author s crawford vp abstract in this paper i discuss the state of progress in applications of game theory in economics and try to identify possible future developments that are likely to yield further progress to keep the topic manageable i focus on a canonical economic problem that is inherently game theoretic that of fostering efficient coordination and cooperation in relationships with particular attention to the role of communication i begin with an overview of noncooperative game theory s principal model of behavior nash equilibrium i next discuss the alternative thinking and learning rationales for how real world actors might reach equilibrium decisions i then review how nash equilibrium has been used to model coordination communication and cooperation in relationships and discuss possible developments

technical change labor use and income distribution in the muda irrigation project factors influencing the performance of net farm income in families who adopted the double cropping regime in malaysia are analyzed in light of the muda irrigation project which supplies off season water to approximately 250 000 acres of padi land in n w malaysia from 1970 when water was first released to 1975 when the full feasible command area was served most of the project area s 50 000 farm families switched from single to double cropping this switch was accompanied by an extremely rapid adoption of short maturing improved varieties of rice and large increases in yield in both seasons the result of this technical change was an increase in padi production from 384 721 tons in 1969 to 795 830 tons in 1974 approximately 50 percent of the country s production there were also important changes in net farm income labor use and output and factor prices factors related and unrelated to the muda project are found to have caused these changes

targeting child labor in debt bondage despite recent multilateral efforts to single out child labor in debt bondage as one of the worst forms of child labor several important questions have yet to be addressed how pervasive is the phenomenon are there systematic correlations between the incidence of children in debt bondage and the economic legislative and financial development indicators of the economy how does an understanding of these correlates affect the way national and international policy measures aimed at targeting this form of child labor are perceived this article addresses each of these questions the empirical findings suggest strong correlation between the likelihood of the incidence of child labor in debt bondage with the stage of development of an economy the stage of financial development and enforcement of core labor rights building on this evidence the article presents a theoretical model that highlights the drawbacks and merits of a number of policies aimed at putting checks on child labor in debt bondage

stagflationary effects of monetary stabilization policies a quantitative analysis of south korea this paper presents a macro model of the korean economy that focuses on short run macro economic adjustment and more in particular on the transmission channels of monetary policy between the financial and the real sector of the economy in addition to the usual link between monetary policy and aggregate demand via investment the link between monetary policy and the supply side of the economy via the financing of working capital with borrowed funds is incorporated this link can potentially reverse the short run impact of tight money on inflation and aggregate the impact on output both export prices and domestic prices show a significant sensitivity to cost of financing working capital this credit supply side link gives a stagflationary bias to restrictive credit policies the empirical relevance of this phenomenon is strongly supported by the simulation results derived with the model structurally section 2 of the paper focuses on the real sector part of the model section 3 discusses the financial sector in section 4 different monetary stabilization packages are simulated using the model presented in sections 2 and 3 and alternative policy measures are discussed the simulation runs show strong short run stagflationary effects of tight money policies

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed