do minority white unemployment differences really exist we develop a model of labor force status federal employment nonfederal employment unemployment and out of the labor force that depends on human capital variables local labor market conditions and personal characteristics according to the estimated model for white non hispanic males and females a substantial difference exists between blacks and white non hispanics even after correction for the control variables however the control variables explain almost all of the difference between hispanics and white non hispanics

network effects homogeneous goods and international currency choice new evidence on oil markets from an older era conventional wisdom has it that network effects are strong in markets for homogenous goods leading to the dominance of one settlement currency in such markets the dominance of the us dollar in global oil markets is said to epitomize this phenomenon we question this presumption with evidence for earlier periods showing that several national currencies have simultaneously played substantial roles in global oil markets european oil import payments before and after world war ii were split between the dollar and non dollar currencies mainly sterling differences in use of the dollar across countries were associated with trade linkages with the united states and the size of the importing country that several national currencies could simultaneously play a role in international oil settlements suggests that a shift from the current dollar based system toward a multipolar system in the period ahead is not impossible

why do foreigners invest in the united states abstract why are foreigners willing to invest over 2 trillion per year in the united states this paper tests various hypotheses and finds that standard portfolio allocation models and diversification motives are poor predictors of foreign holdings of u s liabilities instead foreigners hold greater shares of their investment portfolios in the united states if they have less developed financial markets the magnitude of this effect decreases with income per capita countries that trade more with the united states also have greater portfolio shares in u s equity and bond markets these results support recent theoretical work on the role of financial development in sustaining global imbalances and have important implications for whether the united states can continue to attract sufficient financing from abroad without major changes in asset prices and returns especially in bond markets

rationalizing child support decisions the authors provide a framework within which the child support compliance decisions of noncustodial fathers and the child support awards set by institutional agents can be coherently interpreted the model of child support transfers is able to capture qualitatively the features of the monthly payment distribution estimated parental decision rules are used to infer the implicit weights given by institutional agents to the postdivorce welfare of parents and children the authors find that the weight attached to the combined welfare of the custodial mother and child is significantly less than the weight given to the father s welfare in most sample cases copyright 1995 by american economic association

which foreign states support the global use of the chinese renminbi the international political economy of currency internationalisation the internationalisation of the chinese renminbi has taken a path distinct from most cases involving previous international currencies in that policy measures adopted by governments have played crucial roles in it this paper conducts a cross country analysis of the factors that have led foreign governments to introduce three primary policy infrastructures to support renminbi use renminbi swap lines renminbi qualified foreign institutional investor quotas and renminbi clearing banks our analysis shows that a state holding renminbi assets among its reserves or having more developed financial markets is likely to establish a higher level of policy infrastructure supporting renminbi use we also find that a country s economic and political relations with china may have meaningful impacts on the level of its establishment of those renminbi related policy infrastructures these findings significantly expand our understanding of renminbi internationalisation by identifying which non chinese factors have affected its progress to date they also contribute meaningfully to the literature on currency internationalisation and international currencies in general by calling attention to the roles of foreign states in the process of a currency s internationalisation

when did the dollar overtake sterling as the leading international currency evidence from the bond markets abstract we offer new evidence on the emergence of the dollar as the leading international currency focusing on its role as currency of denomination in global bond markets we show that the dollar overtook sterling much earlier than commonly supposed as early as in 1929 financial development appears to have been the main factor helping the dollar to overcome sterling s head start the finding that a shift from a unipolar to a multipolar international monetary and financial system has happened before suggests that it can happen again that the shift occurred earlier than commonly believed suggests that the advantages of incumbency are not insurmountable and that financial deepening was a key determinant of the dollar s emergence points to the challenges facing currencies aspiring to international status

the determinants of cross border equity flows abstract we explore a new panel data set on bilateral gross cross border equity flows between 14 countries 1989 1996 we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions gross transaction flows depend on market size in source and destination country as well as trading costs in which both information and the transaction technology play a role distance proxies some information costs and other variables explicitly represent information transmission an information asymmetry between domestic and foreign investors and the efficiency of transactions the geography of information is the main determinant of the pattern of international transactions while there is weak support in our data for the diversification motive once we control for the informational friction we broaden the scope of our results by presenting some evidence linking the results on equity transactions to equity holdings

currency exchange in a random search model this paper investigates foreign exchange trading a phenomenon that typically accompanies international trade a search theoretic general equilibrium approach is adopted to study a two country two currency model for some parameter values of the model there exist some pure strategy equilibria in which commodity currency trade is conducted primarily through local currency and in which there is active currency currency exchange the coexistence of valued foreign currency and its local non acceptability conforms largely with the country specific cash in advance constraint that is often assumed exogenously in international finance literature

toward a theory of international currency we use the framework of random matching games and develop a two country model of the world economy in which two national currencies compete and may be circulated as media of exchange there are multiple equilibria which differ in the areas of circulation of the two currencies in one equilibrium the two national currencies are circulated only locally in another one currency is circulated as an international currency there is also an equilibrium in which both currencies are accepted internationally we also find an equilibrium in which the two currencies are directly exchanged we first characterize the existence conditions of these equilibria in terms of the relative country size and the degree of economic integration and then use an evolutionary approach to equilibrium selection to explain the evolution of the international currency as the two economies become more integrated some welfare implications are also discussed for example a country can improve its national welfare by letting its own currency circulate internationally provided the domestic circulation is controlled for when the total supply is fixed however a resulting currency shortage may reduce the national welfare

home bias in open economy financial macroeconomics standard theory would predict that investors hold a well diversified portfolio of equities across the world but despite the process of financial globalization investors still hold a disproportionate share of local equities in their portfolio the equity home bias french and poterba 1991 we review the various explanations of this puzzling phenomenon in the context of recent developments in macroeconomic modelling that have allowed to incorporate sophisticated international portfolio choices in standard two country general equilibrium models we refer to this literature as open economy financial macroeconomics we focus on three broad classes of explanations i hedging motives in frictionless financial markets real exchange rate and non tradable income risk ii asset trade costs in international financial markets such as transaction costs differences in tax treatments between national and foreign assets iii informational frictions and behavioural biases these recent developments raise the need for new portfolio facts beyond the equity home bias and we will present some new evidence on cross border asset holdings across different types of assets equities bonds and bank lending we also present some new micro data on institutional holdings of equity at the fund level these data should inform macroeconomic modelling of the open economy and a growing literature of models of delegated investment

a model of the international monetary system we propose a simple model of the international monetary system we study the world supply and demand for reserve assets denominated in different currencies under a variety of scenarios a hegemon vs a multipolar world abundant vs scarce reserve assets a gold exchange standard vs a floating rate system we rationalize the triffin dilemma which posits the fundamental instability of the system as well as the common prediction regarding the natural and beneficial emergence of a multipolar world the nurkse warning that a multipolar world is more unstable than a hegemon world and the keynesian argument that a scarcity of reserve assets under a gold standard or at the zero lower bound is recessionary our analysis is both positive and normative

welfare child support and strategic behavior do high orders and low disregards discourage child support awards qualitative research has documented strategic behavior in response to child support policy parents of children on welfare have an incentive to avoid formal child support since most states limit the amount of formal child support that women on welfare can receive the disregard and have relatively high child support orders for low income fathers this pa per develops a simple model to make several predictions about how the disregard and order might interact to influence formal child support or ders using data from the cps css merged with state child support vari ables i find some evidence that higher orders and lower disregards are associated with fewer child support orders

how much does violence tax trade abstract we investigate the empirical effect of violence as compared to other trade impediments on trade flows our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999 which brings together information from the rose data set the iterate data set for terrorist events and data sets of external and internal conflict we explore these data with traditional and theoretical gravity models we calculate that for a given country year the presence of terrorism together with internal and external conflict is equivalent to as much as a 30 tariff on trade this is larger than estimated tariff equivalent costs of border and language barriers and tariff equivalent reduction through generalized systems of preference and wto participation

exchange rate theory and practice this volume grew out of a national bureau of economic research conference on exchange rates held in bellagio italy in 1982 in it the world s most respected international monetary economists discuss three significant new views on the economics of exchange rates rudiger dornbusch s overshooting model jacob frenkel s and michael mussa s asset market variants and pentti kouri s current account portfolio approach their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today including those of the european monetary system

collateral damage trade disruption and the economic impact of war abstract conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity especially international trade we study the effects of war on bilateral trade with available data extending back to 1870 using the gravity model we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals controlling for other determinants of trade as well as the possible effects of reverse causality we find large and persistent impacts of wars on trade national income and global economic welfare we also conduct a general equilibrium comparative statics exercise that indicates costs associated with lost trade might be at least as large as the conventionally measured direct costs of war such as lost human capital as illustrated by case studies of world wars i and ii

interactions between unmarried fathers and their children the role of paternity establishment and child support policies nonmarital childbearing has increased substantially over the last few decades comprising almost one third of all births in the united states in 1995 u s department of health and human services 1997 poverty rates for these children are high and many rely on public assistance reducing nonmarital childbearing and increasing responsibility of absent fathers were important goals of the 1996 welfarereform legislation and earlier state and federal child support legislation although there is some evidence that paternity establishment efforts increase the likelihood of child support awards cynthia miller and irwin garfinkel 1999 argys et al 2001 until recently microdata to assess the determinants and consequences of paternity were not available we use the national longitudinal survey of youth 1997 cohort nlsy97 to explore the determinants of paternity and the relationship between paternity and father involvement such as child support awards and contact between fathers and children our data show that paternity is associated with increases in all types of involvement however if the correlation is due solely to unobserved heterogeneity then paternity policies would not have a causal effect on involvement in this paper we model the paternity and father involvement decisions jointly our results suggest that welfare child support and paternity policies do alter the probability of establishing paternity and that exogenous increases in paternity can affect father child interactions i background

the geography of trade in goods and asset holdings gravity models have been widely used to describe bilateral trade in goods portes and rey portes r rey h 2005 the determinants of cross border equity flows journal of international economics 65 2 269 296 applied this framework to cross border equity flows and found that distance which proxies information asymmetries is a surprisingly very large barrier to cross border asset trade we adopt a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings in a simultaneous gravity equations framework providing different instruments for both endogenous variables we show that a 10 increase in bilateral trade raises bilateral asset holdings by 6 to 7 the reverse causality is also significant albeit smaller controlling for trade the impact of distance on asset holdings is drastically reduced keywords gravity models international finance international trade simultaneous equations

the emergence persistence and recent widening of the racial unemployment gap census data show that the ratio of black to white unemployment rates currently in excess of 2 1 was small or nonexistent before 1940 widened dramatically during the 1940s and 1950s and widened again in the 1980s the authors decompose changes in the unemployment gap over the years 1880 1990 to identify the separate contributions of changes in observable worker characteristics and shifts in labor demand nearly all of the widening of the gap during the 1940s and 1950s can be attributed to regional shifts of workers and declining demand in markets where black workers were concentrated after 1970 improvements in the relative educational status of black workers would have narrowed the unemployment gap slightly but demand shifts adverse to black workers more than canceled out these gains

mars or mercury the geopolitics of international currency choice we assess the role of economic and security considerations in the currency composition of international reserves we contrast the mercury hypothesis that currency choice is governed by pecuniary factors familiar to the literature such as economic size and credibility of major reserve currency issuers against the mars hypothesis that this depends on geopolitical factors using data on foreign reserves of 19 countries before world war i for which the currency composition of reserves is known and security alliances proliferated our results lend support to both hypotheses we find that military alliances boost the share of a currency in the partner s foreign reserve holdings by 30 percentage points these findings speak to current discussions about the implications of possible u s disengagement from global geopolitical affairs in a hypothetical scenario where the u s withdraws from the world our estimates suggest that long term u s interest rates could rise by as much as 80 basis points assuming that the composition of global reserves changes but their level does not

the drivers of financial globalization over the past decade emerging markets have accounted for a growing fraction of world gdp and international trade reflecting fast growth in china and india but also strong economic performance across the board and the spec tacular increase in foreign exchange reserve holdings the growing importance of sovereign wealth funds and the pattern of global imbal ances more generally suggest that these coun tries are also playing a major role in financial globalization

theory and relevance of currency substitution with case studies for canada and the netherlands antilles textabstractabstract this paper develops the theory of currency substitution from a choice theoretic point of view the main result offers a simple relationship between the relative amount of currencies held and their opportunity costs i e interest and capital gains our hypothesis is tested by case studies for canada and the netherlands antilles in contradistinction with other studies we conclude that the elasticity of currency substitution is very small and negative it is shown how the omission of the interest term in other studies biases the elasticity of currency substitution considerably

a stackelberg model of child support and welfare this article models the child support and welfare decisions of never married parents on welfare as a stackelberg game the mother chooses whether to exit welfare report paternity and to obtain a formal child support order if a child support order is obtained the father chooses whether to comply with the order simulation results from the structural parameters indicate that increasing the child support disregard increases paternal compliance slightly and affects maternal paternity reporting more significantly effects are limited however by low paternal incomes results also indicate that high award amounts can decrease expected child support payments to women on welfare