war and natural resource exploitation abstract we build a theoretical framework that allows for endogenous conflict behaviour i e fighting efforts and for endogenous natural resource exploitation i e speed ownership and investments while depletion is spread in a balanced hotelling fashion during peace the presence of conflict creates incentives for rapacious extraction as this lowers the stakes of future contest this voracious extraction depresses total oil revenue especially if world oil demand is relatively elastic and the government s weapon advantage is weak some of these political distortions can be overcome by bribing rebels or by government investment in weapons the shadow of conflict can also make less efficient nationalized oil extraction more attractive than private extraction as insecure property rights create a holdup problem for the private firm and lead to a lower license fee furthermore the government fights less intensely than the rebels under private exploitation which leads to more government turnover without credible commitment to future fighting efforts private oil depletion is only lucrative if the government s non oil office rents are large and weaponry powerful which guarantees the government a stronger grip on office and makes the holdup problem less severe

regime switches in exchange rate volatility and uncovered interest parity abstract we use a regime switching model to examine how exchange rate volatility is related to the failure of uncovered interest parity main findings are as follows first exchange rate returns are strongly influenced by regime switches in the relationship between the returns and interest rate differentials second low yielding currencies appreciate less frequently but once it occurs their movements are faster than when they depreciate third depreciation of low yielding currencies and low volatility are mutually dependent on each other finally these three findings are more evident for shorter horizons the second and third results are consistent with a market participants view short term carry trades in a low volatility environment and their rapid unwinding substantially influence exchange rates we consider the effects of funding liquidity to explain these results

job displacement from agriculture unlike manufacturing employers small agricultural employers are generally not required to participate in the unemployment insurance system which leaves many farm workers ineligible for unemployment benefits theory implies that displaced workers who are ineligible for benefits experience shorter jobless spells and a lower reemployment wage with data from the displaced workers survey we show that displaced agricultural workers spend 4 6 fewer weeks unemployed and upon reemployment earn 9 less than displaced manufacturing workers not surprisingly in states where small agricultural employers are required to participate in the unemployment insurance program postdisplacement outcomes for agricultural and manufacturing workers are similar copyright 2010 oxford university press

nonstationarity in job search theory generally structural job search models are taken to be stationary in this paper models are examined in which every exogenous variable can cause nonstationarity for instance because its value is dependent on unemployment duration a general differential equation that describes the evolution of the reservation wage over time is derived as an empirical illustration a nonstationary structural model is estimated that focuses on the consequences of a downward shift in the level of benefits it appears that the elasticity of duration with respect to the level of benefits after the shift is much larger than the elasticity with respect to the level before the shift this paper examines the movement of a job seeking individual s reservation wage over time in a general nonstationary job search model also results concerning comparative dynamics of the reservation wage and the distribution of the duration of unemployment are derived as an empirical illustration a nonstationary structural model is estimated the nonstationarity originates from the decrease in the level of benefits when unemployment duration equals two years from the results some detailed policy recommendations can be deduced as one is able to distinguish the effect of a change in the level of benefits in the first two years of unemployment from the effect of a change in the level after that period recently the use of job search models for the analysis of unemployment duration has become widespread the reduced form approach in empirical studies see e g lancaster 1979 in which only the hazard of the duration distribution is estimated is gradually being replaced by a more structural approach the latter way of modelling is characterized by the explicit use in empirical analysis of the reservation wage equation as stated by the theory e g yoon 1981 lancaster and chesher 1983 lynch 1983 narendranathan and nickell 1985 and van den berg 1988 use the complete theoretical framework of job search theory to make inferences about search behaviour however the structural models used in these studies are stationary this implies that variables like unemployment benefits or the rate of arrival of job offers are assumed to be constant over the spell of unemployment which is often at variance with reality what is more various reduced form empirical studies indicate a significant durationdependence of the re employment probability which is generally interpreted as evidence in favour of the presence of nonstationarity see e g blau and robins 1986 kooreman and ridder 1983 lancaster 1979 and narendranathan nickell and stern 1985 consequently there is a need to model reservation wage movements over time based on a nonstationary theoretical framework

currency carry trade regimes beyond the fama regression abstract we show that carry trade strategies resemble fx option strategies that sell out of the money puts on high interest rate currencies both strategies collect premiums to generate persistent excess returns that unwind sharply when volatility increases we also show that the widely documented negative slope coefficient in regressions of exchange rate depreciation on forward currency premiums is an artifact of the volatility regime in high volatility regimes the so called fama regression produces a positive coefficient greater than unity we finally document the existence of an intuitive co movement between currency risk premiums and yield curve risk factors

adaptation and mitigation in long term climate policies the paper analytically explores the optimal allocation of investments into mitigation and environmental adaptation against climate change damages at a macroeconomic level the economic environmental model is formulated as a social planner problem where adaptation and abatement investments are separate decision variables the existence of a unique steady state is proven a comparative static analysis of optimal investments leads to essential implications for associated long term environmental policies it is shown that the optimal policy mix between adaptation and mitigation is lower for countries with higher economic efficiency for all applicable parameter ranges data calibration and numerical simulations are provided to estimate practical validity of theoretical outcomes

legal status and earnings of agricultural workers agricultural workers who work in the united states earn 15 more on average than do undocumented workers these earnings differentials vary substantially with demographic characteristics for example much of the weekly earnings loss from not having legal status can be offset by language ability most of the earnings differential is due to wage differentials rather than hours differentials

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

trades of the living dead style differences style persistence and performance of currency fund managers abstract we make use of a new database on daily currency fund manager returns over a three year period 2005 2008 this higher frequency data allows us to estimate both alpha measures of performance and beta style factors on a yearly basis which in turn allows us to test for persistence we find no evidence to support alpha persistence a manager s alpha in one year is not significantly related to his alpha in the prior year on the other hand there is substantial evidence for style persistence funds that rely on carry trend or value trading or with a long short bias toward currency volatility are likely to maintain that style in the following year in addition we are able to examine the performance of managers that survive through the entire sample period versus those that drop out we find significant differences in both the investment styles of living versus deceased funds as well as their realized alpha performance measures we conjecture that both style differences and ineffective market timing rather than market conditions have impacted performance outcomes and induced some managers to close their funds

the performance of ndf carry trades this paper investigates the performance of carry trade strategies for currencies with non deliverable forward ndf contracts we find that carry trades for currencies with ndf contracts are associated with higher sharpe ratios compared to carry trades for currencies with deliverable forward df contracts we also find that during the recent financial crisis df carry trades incur heavy losses while ndf carry trades realize insignificant losses df carry trade payoffs are shaped by credit risk global foreign exchange fx volatility and crash risk in contrast ndf carry trade payoffs are driven by global fx volatility and crash risk liquidity risk and currency convertibility risk measured by deviations from covered interest parity in offshore markets while global convertibility risk has a limited effect on carry trades

job displacement relative wage changes and duration of unemployment using special cps data on displaced workers this article investigates the wage consequences of job displacement in a framework that emphasizes the effects of past job duration s and unemployment duration s on postdisplacement wages our model also attempts to take account of the simultaneity between unemployment duration and the postdisplacement wage it is found that duration strongly reduces subsequent earnings and that considerable overstatement of the loss in firm specific training investments is implied by conventional routes to measuring wage losses

the curse of natural resources in fractionalized countries abstract this paper develops a model that can explain why natural resources are a blessing for some countries but a curse for others in this model natural resources cause fighting activities between rivalling groups fighting reduces productive activities and weakens property rights making productive activities even less attractive the aggregate production decrease exceeds the natural resources direct positive income effect if and only if the number of rivalling groups is sufficiently large the model thus predicts that natural resources lower incomes in fractionalized countries but increase incomes in homogenous countries empirical evidence supporting this prediction is provided

political foundations of the resource curse a simplification and a comment in this note we show how a considerably simpler model than the one in our original jde 2006 paper generates all the same results we also acknowledge an error in the specification of a utility function in our previous paper

inequality in landownership the emergence of human capital promoting institutions and the great divergence this paper suggests that inequality in the distribution of landownership adversely affected the emergence of human capital promoting institutions e g public schooling and thus the pace and the nature of the transition from an agricultural to an industrial economy contributing to the emergence of the great divergence in income per capita across countries the prediction of the theory regarding the adverse effect of the concentration of landownership on education expenditure is established empirically based on evidence from the beginning of the 20th century in the u s

the first law of petropolitics finalversion received19 april2011 we examine empirically the relationship between crude oil prices and the ebb and ow of democratic insti tutions in order to test the hypothesis that high oil prices undermine democracy and sustain autocracy we use a variety of time series and panel data methods over a wide range of country subsamples and timeperiods nding strictly no evidence in favour of this so called first law of petropolitics friedman2006

the carry trade and fundamentals nothing to fear but feer itself the carry trade is the investment strategy of going long in high yield target currencies and short in low yield funding currencies recently this nave trade has seen very high returns for long periods followed by large crash losses after large depreciations of the target currencies based on low sharpe ratios and negative skew these trades could appear unattractive even when diversied across many currencies but more sophisticated conditional trading strategies exhibit more favorable payos we apply novel within economics binary outcome classication tests to show that our directional trading forecasts are informa tive and out of sample loss function analysis to examine trading performance the critical conditioning variable we argue is the fundamental equilibrium exchange rate feer expected returns are lower all else equal when the target currency is overvalued like traders researchers should incorporate this information when evaluating trading strategies when we do so some questions are resolved negative skewness is purged and market volatility vix is uncorrelated with returns other puzzles remain the more sophisticated strategy has a very high sharpe ratio suggesting market ineciency

lessons from the evolution of foreign exchange trading strategies abstract the adaptive markets hypothesis posits that trading strategies evolve as traders adapt their behavior to changing circumstances this paper studies the evolution of trading strategies for a hypothetical trader who chooses portfolios from foreign exchange forex technical rules in major and emerging markets the carry trade and us equities the results show that a backtesting procedure to choose optimal portfolios improves upon the performance of nonadaptive rules we also find that forex trading alone dramatically outperforms the s p 500 with much larger sharpe ratios over the whole sample but there is little gain to coordinating forex and equity strategies which explains why practitioners consider these tools separately forex trading returns dip significantly in the 1990s but recover by the end of the decade and have been markedly superior to an equity position since 1998 overall trading rule returns still exist in forex markets with substantial stability in the types of rules though they have migrated to emerging markets to a considerable degree

how changes in labor demand affect unemployed workers this study analyzes the manner in which certain favorable shifts in labor demand affect job search although all shifts increase reservation wages they do not necessarily decrease expected unemployment spell durations and increase expected post unemployment wages so that upward sloping short run phillips curves may occur a result due to chamberlain is used to demonstrate that if the wage offer distribution is restricted to be logconcave two of the shifts guarantee downward sloping phillips curves for one of these two shifts previous research by flinn and heckman used logconcavity in a different manner to achieve properly shaped phillips curves

risk uncertainty and exchange rates this paper is motivated by two facts failure of log linear empirical exchange rate models of the 1970 s and the observed variability of risk premiums in the forward market rational maximizing models predict that changes in conditional variances of monetary policies government spendings and income growths affect risk premiums and induce conditional volatility of exchange rates i examine theoretically how changes in these exogenous conditional variances affect the level of the current exchange rate and attempt to quantify the extent that this channel explains exchange rate volatility using autoregressive conditional heteroscedastic models

can implied volatility predict returns on the currency carry trade abstract currency carry strategies have long positions in currencies with a high interest rate and short positions in currencies with a low interest rate currency carry strategies have generated about 5 4 return per annum sharpe ratio 0 57 over the period december 1996 to may 2014 however during the recent financial crisis the carry strategy suffered losses of up to 20 on invested capital we investigate whether investors could have used the implied option volatility index on the us equity market the vix or the option implied volatility index from g7 currencies the vxy to time the currency carry trade we examine a large set of timing strategies and find that for some specific settings excess returns can be as large as 2 5 per annum however when we take into account that we investigated many trading strategies these excess returns turn out not to be statistically significant hence our findings cast doubt on implied volatility as a stand alone timing indicator for currency carry trading in real life portfolio decisions

do natural resources fuel authoritarianism a reappraisal of the resource curse a large body of scholarship finds a negative relationship between natural resources and democracy extant cross country regressions however assume random effects and are run on panel datasets with relatively short time dimensions because natural resource reliance is not an exogenous variable this is not an effective strategy for uncovering causal relationships numerous sources of bias may be driving the results the most serious of which is omitted variable bias induced by unobserved country specific and time invariant heterogeneity to address these problems we develop unique historical datasets employ time series centric techniques and operationalize explicitly specified counterfactuals we test to see if there is a long run relationship between resource reliance and regime type within countries over time both on a country by country basis and across several different panels we find that increases in resource reliance are not associated with authoritarianism in fact in many specifications we generate results that suggest a resource blessing

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

an economic theory of leadership turnover abstract in an infinite horizon stochastic model a coup not only disciplines a dictator s policy towards a group of kingmakers but also enables a kingmaker to become a dictator greater competition for the dictator s position a lower impact of the dictator s policy on the kingmakers or lower risks of staging a coup raises the benefit of a coup relative to its opportunity cost and so raises the probability of a coup since periodic shocks affect the efficacy of the dictator s policy a bad enough shock makes it too costly for even talented dictators to avert a coup more talented dictators are able to survive more negative shocks so the worst shock in a dictator s reign is informative about the probability of a coup conditional on the worst shock the probability of a coup is independent of a dictator s duration in office the unconditional probability declines with duration

a lipsetian theory of voluntary power handover we consider an autocracy where the ruling elite control both the resource wealth and ed ucation policies education prompts economic growth and enriches the budget of the elite however education also increases the awareness of citizens capturing their reluctance to accept a dictatorship and their labor market aspirations and forces the elite to ex pand redistribution or handover the power a power handover leads to a more democratic regime where the elite retains at least partially its economic power this trade offis the backbone of our lipsetian theory of voluntary power handover this theory provides new insights on the positive relationship between economic development education and de mocratization and on the negative relationship between inequality and democratization finally we revisit the resources curse hypothesis within our setting

migration of seasonal agricultural workers nearly half of all seasonal farm workers migrate at least 75 miles in a given year an expected earnings differential from migration weakly induces migration a 10 earnings differential raises the probability of migrating by slightly more than 1 this result indicates that there are substantial costs to migrating and that employers must offer large earnings premia to induce a substantial number of workers to move to their jobs some demographic groups earn substantially higher earnings by migrating these higher earnings from migration are primarily due to higher wages rather than more hours of work

on the timing of political regime changes in resource dependent economies we consider a resource dependent economy initially ruled by the elite the transition from the autocratic to a more democratic regime takes place only if the citizens decide to revolt against the elite the occurrence of a revolution primarily depends on the autocratic regime vulnerability and the level of inequalities both being driven by the elite s redistribution and repression policies first we show that when a political transition is inevitable the elite choose the maximum rate of redistribution to lengthen their period in office second we find that the duration of the autocratic regime is linked to resource abundance and how it relates to the elite s policies more resources lead to a shorter reign of a redistributive regime which may not be the case of a repressive regime finally we interpret the arab spring sequence in light of our findings

a stochastic dominance analysis of yen carry trades abstract yen carry trades have made headline news for over a decade we examine the profitability of such trades for the period 2001 2009 yen carry trades generated high mean returns and sharpe ratios prior to the recent financial crisis they continued to outperform major stock markets for the full sample period given the non normality of carry trade returns we apply non parametric tests based on stochastic dominance sd to evaluate whether the high returns of yen carry trades are compatible with risk as reflected in returns on us and global stock market indices we apply a general test for sd developed recently by linton maasoumi and whang 2005 to six currencies as well as portfolios of these currencies for a large class of risk averse investors profits from yen carry trades cannot be attributed to risks

impact of macro economic surprises on carry trade activity abstract can official news and policy announcements affect foreign exchange speculation a widespread speculative strategy in foreign exchange markets is carry trade this paper explores the links between macro economic news and foreign exchange options to identify macro economic fundamentals most relevant to the pricing of downside risk measured by risk reversals options contracts to carry trade activity focusing primarily on the japanese yen carry trade we identify a significant impact of macro economic surprises on dollar yen risk reversals the effect is sizeable with news related to bilateral trade balance of particular concern moreover there is a close link between risk reversals and speculative futures positions in japanese yen this allows us to quantify a substantial effect of macro economic news on carry trade activity with the cost of hedging as the transmission mechanism

anomalies foreign exchange most all behavior can be explained by assuming that agents have stable well defined preferences and make rational choices consistent with those preferences in markets that eventually clear an empirical result qualifies as an anomaly if it is difficult to rationalize or if implausible assumptions are necessary to explain it within the paradigm this column will present a series of such anomalies readers are invited to suggest topics for future columns by sending a note with some reference to or better yet copies of the relevant research comments on anomalies printed here are also welcome the address

natural resources rent seeking and welfare abstract a new and very simple mechanism to explain why natural resource abundance may lower income and welfare is developed in a model with rent seeking a greater amount of natural resources increases the number of entrepreneurs engaged in rent seeking and reduces the number of entrepreneurs running productive firms with a demand externality it is shown that the drop in income as a result of this is higher than the increase in income from the natural resource more natural resources thus lead to lower welfare

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

effective property rights conflict and growth abstract this paper shows how the interaction between conflict and growth can give rise to a nonmonotone relationship between property rights and social welfare this interaction is illustrated in a model of endogenous growth in which equilibrium diversion of resources is the cost of securing effective property rights a symmetric equilibrium allocation associated with more secure property rights and faster growth can be pareto dominated by one associated with poorer property rights and slower growth faster growth can exacerbate the problem of diversion whenever property rights are sufficiently poor these results call for caution before a society decides to pursue economic growth independently of the institutional structure of property rights furthermore if this structure is inappropriate piecemeal reform might not be in the interest of society and a substantial reform might be necessary if it is to be welfare improving

resource windfalls political regimes and political stability abstract we study theoretically and empirically whether natural resource windfalls affect political regimes we show that windfalls have no effect on democracies while they have heterogeneous political consequences in autocracies in deeply entrenched autocracies the effect of windfalls is virtually nil while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system to frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability and potential challengers decide whether to try to unseat the incumbents the model uncovers a mechanism for the asymmetric impact of resource windfalls on democracies and autocracies as well as the the differential impact within autocracies

trading the forward bias are there limits to speculation abstract in this paper we investigate whether trading the forward bias allows for economically significant excess returns we find that bias trading strategies can be viewed as attractive investment opportunities per se useful diversification devices and promising portfolio extensions for active fund managers trying to beat their benchmarks the empirical results which also mirror the problems arising in attempts to explain the puzzle by risk premia are consistent with market evidence that the bias is traded in practice overall our findings suggest that limits to speculation are unlikely to provide a stand alone explanation for the persistence of the forward bias

conditioning carry trades less risk more return abstract prior studies show that extreme interest rate differentials irds and high foreign exchange rate fx volatility have substantial explanatory power for the validity of uip we show that these contemporaneous drivers also have predictive power by implementing a conditional currency carry trade ct strategy that excludes regimes for which uip is likely to hold conditioning high fx volatility only or on both fx volatility and extreme irds outperforms the base case unconditional ct strategy in virtually any of the settings analyzed conditioning on very large irds only shows mixed findings our strategy works best for smaller ct portfolios

the specification and estimation of dynamic stochastic discrete choice models a survey our main goal is to quantify the returns to a career in the united states congress we specify a dynamic model of career decisions of a member of congress and estimate this model using a newly collected dataset given estimates of the structural model we

turnover in u s agricultural labor markets agricultural workers move in and out of agriculture frequently migration between types of jobs takes relatively little time legal female workers tend to stay out of the u s labor market longer once they stop being employed and their access to jobs outside of agriculture is more limited than that of their male counterparts predictions made when the 1986 immigration reform and control act was passed that granting people amnesty would induce most of them to leave agriculture were incorrect copyright 2002 oxford university press

piecewise closed loop equilibria in differential games with regime switching strategies we propose a new methodology exploring piecewise closed loop equilibrium strategies in differential games with regime switching actions we develop a general game with two players players choose an action that influences the evolution of a state variable and decide on the switching time from one regime to another compared to the optimal control problem with regime switching necessary optimality conditions are modified for the first player to switch when choosing her optimal switching strategy this player considers the impact of her choice on the other player s actions and consequently on her own payoffs in order to determine the equilibrium timing of regime changes we derive conditions that help eliminate candidate equilibrium strategies that do not survive deviations in switching strategies we then apply this new methodology to an exhaustible resource extraction game

carry trade and foreign exchange rate puzzles this article demonstrates that carry trade is part of the explanation of foreign exchange rate puzzles we introduce carry traders in a heterogeneous agent model in addition to fundamentalists and chartists our model has the ability to produce the stylized facts observed in empirical exchange rates such as heavy tails excess volatility and volatility clustering as well as the negative relationship between market volatility and carry trade activity we find that the interaction between carry traders and chartists provides an explanation for the forward premium puzzle this effect is strengthened by chartists who extrapolate the trend induced by carry trade

kleptocracy and divide and rule a model of personal rule many developing countries have suffered under the personal rule of kleptocrats who implement highly inefe cient economic policies expropriate the wealth of their citizens and use the proceeds for their own glorie cation or consumption we argue that the success of kleptocrats rests in part on their ability to use a divide and rule strategy made possible by the weakness of institutions in these societies members of society need to cooperate in order to depose a kleptocrat yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move and redistributing the benee ts to those who need to agree to it thus the collective action problem can be intensie ed by threats which remain off the equilibrium path in equilibrium all are exploited and no one challenges the kleptocrat kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents when opposition groups are shortsighted when the average productivity in the economy is low and when there is greater inequality between producer groups because more productive groups are more dife cult to buy off jel o12 h00

more oil less democracy evidence from worldwide crude oil discoveries this article exploits variations in the timing and size of oil discoveries to identify the impact of oil wealth on democracy i find that discovering 100 billion barrels of oil approximately the initial endowment of iraq pushes a country s democracy level almost 20 percentage points below trend after three decades the estimated effect is larger for oilfields with higher quality oil and lower exploration and extraction costs however the estimates become less precise when oil abundance is measured by oil discovery per capita suggesting politicians may care about the level instead of the per capita value of oil wealth

a comparison of the economic well being of farm and nonfarm households this study compares the economic well being of farm and nonfarm households using data from the agricultural resource management survey and the survey of consumer finances comparisons are made in terms of income and wealth using parametric and nonparametric tests regression analyses and inequality measures the results show that the economic well being of households differs based on their degree of involvement in business activities and their life cycle stages the main conclusion is that the income of rural residence and intermediate farms is comparable to that of wage earning nonfarm households while commercial farms are similar in well being to nonfarm households with businesses copyright 2008 oxford university press

explaining dispersion in foreign exchange expectations a heterogeneous agent approach this paper combines survey forecasts with a heterogeneous agent model to examine the dispersion of expectations of participants in the foreign exchange market we find distinct variations in the level of dispersion and document that dispersion arises because of the combined effect of market participants holding private information and attaching different weights to fundamental technical and carry trade analyses we estimate a heterogeneous agent model on the survey forecasts and show that the weight attached to the three forecast rules is adjusted over time in response to the relative importance of the rules in the actual foreign exchange market the weights are related to market circumstances the switching model is finally shown to outperform the random walk model in an out of sample forecast exercise

political foundations of the resource curse in this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse we show 1 politicians tend to over extract natural resources relative to the efficient extraction path because they discount the future too much and 2 resource booms improve the efficiency of the extraction path however 3 resource booms by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections increase resource misallocation in the rest of the economy 4 the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create countries without such institutions however may suffer from a resource curse

risky adjustments or adjustments to risks decomposing bank leverage by use of cointegration analysis this paper splits bank leverage into a short and long run dimension regarding the long run if banks leverage ratios or related liability shares are stable over time they form a cointegrating relationship thus cointegration tests indicate whether banks liability ratios were stable or subject to structural breaks during the financial crisis in 2007 and 2008 by endogenous identification of structural breaks my analysis tracks the precise channels of banks leverage adjustments findings on the long run suggest that banks cut their leverage twice in june 2007 banks significantly reduced their foreign debt while in april 2008 they withdrew from interbank borrowing regarding the short run i study how banks adjust to the dynamics of risk proxies from distinct financial markets findings on the short run point out that banks reactions to risks differ considerably across different types of financial markets

nonpecuniary job preferences and welfare losses among migrant agricultural workers effects of nonprovision of job benefits and desirable working conditions are examined empirically for a sample of mexican american and illegal alien migrant agricultural workers welfare losses are identified in that the monetary value to workers of some absent benefits is greater than the cost to farm employers of providing the benefits workers preferences for nonpecuniary benefits are also examined by socioeconomic characteristics illegal aliens exhibit equal or greater preference for fourteen of the fifteen nonpecuniary items under consideration

risk premia carry trade dynamics and economic value of currency speculation in this paper we derive the dynamics and assess the economic value of currency speculation by formalizing the concept of a trader inaction range we show that exchange rate returns comprise a time varying risk premium and that uncovered interest parity uip holds in a speculative sense the often cited forward bias puzzle originates from the omission of the risk premium in standard uip tests consistent with its popularity among market professionals the carry trade strategy can be rationalized as it systematically collects risk premia and generates economic value when applied in multi currency portfolios

democratization or repression abstract regimes controlled by a rich elite often collapse and make way for democracy amidst widespread social unrest such regime changes are often followed by redistribution to the poor at the expense of the former elite we argue that the reason why the elite may have to resort to full scale democratization despite its apparent costs to themselves may be that lesser concessions would be viewed as a sign a weakness and spur further unrest and more radical demands the elite may therefore be forced to choose between repression and the most generous concession a transition to full democracy

the returns to currency speculation in emerging markets the carry trade strategy involves selling forward currencies that are at a forward premium and buying forward currencies that are at a forward discount we compare the payoffs to the carry trade applied to two different portfolios the first portfolio consists exclusively of developed country currencies the second portfolio includes the currencies of both developed countries and emerging markets our main empirical findings are as follows first including emerging market currencies in our portfolio substantially increases the sharpe ratio associated with the carry trade second bid ask spreads are two to four times larger in emerging markets than in developed countries third and most dramatically the payoffs to the carry trade for both portfolios are uncorrelated with returns to the u s stock market this abstract was borrowed from another version of this item

the elusive curse of oil abstract our goal is to show that contrary to the claims made in several recent papers the effect of a large endowment of oil and other mineral resources on long term economic growth of countries has been on balance positive moreover the claims of a negative effect of oil and mineral wealth on the countries institutions are called into question

commodity windfalls polarization and net foreign assets panel data evidence on the voracity effect this paper examines the effects that windfalls from international commodity price booms have on net foreign assets in a panel of 145 countries during the period 1970 2007 the main finding is that windfalls from international commodity price booms lead to a significant increase in net foreign assets but only in countries that are ethnically homogeneous in highly ethnically polarized countries net foreign assets significantly decreased to explain this asymmetry the paper shows that in ethnically polarized countries commodity windfalls lead to large increases in government consumption expenditures and political corruption the paper s findings are consistent with theoretical models of the current account that have a built in voracity effect