the role of capital and labour in shaping the environmental effects of fiscal stimulus abstract although the macroeconomic consequences of short term fiscal stimulation packages have been thoroughly analysed in the literature still relatively little is known about their environmental effects we discuss an important channel through which short run expansionary fiscal policy influences greenhouse gas emissions we show that fiscal policy exerts its impact not only by increasing general level of economic activity but also by changing the composition of factors of production capital and labour using the dynamic stochastic general equilibrium model of economy we demonstrate that fiscal expansion results in a shift from capital intensive to more labour intensive technologies our panel study proves that the latter tends to be associated with lower emissions of greenhouse gases per unit of production hence our analysis demonstrates that an extensive use of fiscal stimulus during recessions can significantly reduce the environmental burden of the additional units of gdp

the microfinance promise in the past decade microfinance programs have demonstrated that it is possible to lend to low income households while maintaining high repayment rates even without requiring collateral the programs promise a revolution in approaches to alleviating poverty and spreading financial services and millions of poor households are served globally a growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success particularly the use of group lending contracts with joint liability for the most part however high repayment rates have not translated into profits and studies of impacts on poverty yield a mixed picture in describing emerging tensions the paper highlights the diversity of innovative mechanisms beyond group lending contracts the measurement of financial sustainability the estimation of economic and social impacts the costs and benefits of subsidization and the potential to reduce poverty through savings programs rather than just credit the promise of microfinance has pushed far ahead of the evidence and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion

group lending repayment incentives and social collateral abstract in this paper we investigate the impact on repayment rates of lending to groups which are made jointly liable for repayment this type of scheme especially in the guise of the grameen bank in bangladesh has received increasing attention we set up and analyze the repayment game which group lending gives rise to our analysis suggests that such schemes have both positive and negative effects on repayment rates the positive effect is that successful group members may have an incentive to repay the loans of group members whose projects have yielded insufficient return to make repayment worthwhile the negative effect arises when the whole group defaults even when some members would have repaid under individual lending we also show how group lending may harness social collateral which serves to mitigate its negative effect

stabilization policy in a currency union abstract we show that the monetary authority of a currency union chooses to do nothing in the face of an asymmetric shock generating inefficiently high inflation and employment fluctuations in the member countries moreover adjustment is equivalent to that under a mckinnon rule

emissions cap or emissions tax a multi sector business cycle analysis abstract we develop a multi sector business cycle model to analyze stochastic implications of reducing co 2 emissions with carbon permits or with carbon taxes in the presence of multiple sources of macroeconomic uncertainty the model is calibrated to reflect the u s experience as in previous studies using a single sector version of our model we find that the cap regime generates lower volatility of real variables than the tax regime but the latter may be preferable from the welfare perspective still our multi sector analysis points to the importance of the origin of the shocks in the ranking of the two instruments and to the desirability of going beyond a single sector analysis in evaluating their merits we find no significant difference between the cap and the tax regimes when shocks come from non energy sectors in contrast the cap has lower volatility but higher welfare costs than the tax for the shocks to energy production

is the european community an optimal currency area optimal taxation versus the cost of multiple currencies the authors propose a view of optimal currency areas that is based on the principles of public finance inflation taxes are distortionary and an optimal spreading of tax distortions may require high inflation in one region and low inflation in another each region would need its own currency to do this on the other hand multiple currencies imply valuation and currency conversion costs which impede trade between regions this tradeoff is explored in the context of the european community s debate over a common currency using a two country variant of robert lucas and nancy stokey s cash in advance model copyright 1990 by american economic association

on the impacts of anticipated carbon policies a dynamic stochastic general equilibrium model approach abstract this paper examines the environmental and welfare impacts of pre announced carbon policies using an environmental dynamic stochastic general equilibrium e dsge model we find that pre announcing a rise in the carbon tax rate could reduce co2 emissions but would decrease output and investment during the interim period between the announcement and implementation dates pre announcing an increase in the carbon tax rate from 1 to 5 1 and 3 years in advance could reduce the quarterly aggregate consumption by 0 081 and 0 114 respectively compared to carbon taxation pre announcing a tightening carbon intensity target could reduce co2 emissions even more while pre announcing a tightening carbon capacity target under a cap and trade regime has no such co2 reduction effect in a welfare analysis we show that an unanticipated rise in the carbon tax rate is more preferable to the 1 year 2 year and 3 year ahead announcements the intensity regime produces a greater welfare than the cap and trade regime which is in turn better than the carbon taxation regime

the quantitative importance of news shocks in estimated dsge models we estimate a dynamic stochastic general equilibrium dsge model with several frictions and both unanticipated and news shocks using quarterly u s data from 1954 to 2004 and bayesian methods we find that unanticipated shocks dominate news shocks in accounting for the unconditional variance of output consumption and investment growth interest rate and the relative price of investment the unanticipated shock to the marginal efficiency of investment is the dominant shock accounting for over 45 of the variance in output growth news shocks account for less than 15 of the variance in output growth within the set of news shocks nontechnology sources of news dominate technology news with wage markup news shocks accounting for about 60 of the variance share of both hours and inflation we find that in the estimated dsge model i the presence of endogenous countercyclical price and wage markups due to nominal frictions substantially diminishes the importance of news shocks relative to a model without these frictions and ii while there is little change in the estimated contributions of technology news when we restrict wealth effects on labor supply the contributions of nontechnology news shocks are relatively more sensitive

the role of subsidies in microfinance evidence from the grameen bank the grameen bank of bangladesh has been in the vanguard of the microfinance movement showing the potential to alleviate poverty by providing credit to poor house holds part of this success has been built on subsidies in 1996 for example total subsidies evaluated at the economic opportunity cost of capital amounted to about us 26 30 million the evidence helps to explain why institutions like grameen have not just sprung up on their own as private commercial ventures and it underscores the value of openly addressing the costs and benefits of subsidization the paper also describes recent difficulties in maintaining high repayment rates q 1999 elsevier science b v all rights reserved

news driven business cycles in small open economies the focus of this paper is on news driven business cycles in small open economies we make two significant contributions first we develop a small open economy model where the presence of financial frictions permits the replication of business cycle co movements in response to news shocks second we use var analysis to identify news shocks using data on four advanced small open economies we find that expected shocks about the future total factor productivity generate business cycle co movements in output hours consumption and investment we also find that news shocks are associated with countercyclical current account dynamics our findings are robust across a number of alternative identification schemes

credibility of policies versus credibility of policymakers standard models of policy credibility defined as the expectation that an announced policy will be carried out emphasize the preferences of the policymaker and the role of tough policies in signaling toughness and raising credibility whether a policy is carried out however will also reflect the state of the economy we present a model in which a policymaker maintains a fixed parity in good times but devalues if the unemployment rate gets too high our main conclusion is that if there is persistence in unemployment observing a tough policy in a given period may lower rather than raise the credibility of a no devaluation pledge in subsequent periods we test this implication on ems interest rates and find support for our hypothesis

an exploration in the theory of exchange rate regimes three exchange rate regimes a float a one sided peg and a cooperative peg are evaluated and compared in terms of efficiency and welfare levels the framework of analysis embodies country specific monies with the money of each country being used to transact in its commodity markets and its currency denominated bonds welfare levels depend only on consumption levels in the presence of perfect foresight all equilibrium allocations are pareto efficient in a floating exchange rate regime the perfect foresight equilibrium allocation coincides with an equilibrium of a costless barter economy the same result holds in a one sided peg if the pegging country s exchange rate stabilizing authority breaks even over time in a cooperative peg regime there is a different equilibrium allocation for each combination of exchange rate levels and monetary policies problems of policy coordination and conflicts in desired monetary policies are discussed

group credit a means to improve information transfer and loan repayment performance information asymmetries plague credit markets in developing countries leading to selective rationing and market segmentation with adverse income distributional consequences for small borrowers data collected from the finca group credit programme in costa rica were used to study the viability and cost effectiveness of group credit as a means to transmit information on borrower creditworthiness groups that screened members and used local information had lower delinquency rates than those that did not however less than half the groups had positive rates of economic return suggesting that group lending may improve information flow but is a cost sensitive institutional design

announcing climate policy can a green paradox arise without scarcity unintended consequences of a pre announced climate policy are studied within a framework that allows for competition between polluting and clean energy sources we show that early announcement of a carbon tax gives rise to a green paradox in that it increases emissions in the interim period between announcement and actual implementation irrespective of the scarcity of fossil fuels the paradoxical outcome is driven by consumption saving tradeoffs facing households who seek to smooth consumption over time and holds both when the announced implementation date is taken as a credible threat and when households are skeptical about the political will or capability of the government to implement the policy as announced

the effect of social capital on group loan repayment evidence from field experiments an important question to microfinance is the relevance of existing social capital in target communities to the performance of group lending this research presents evidence from field experiments in south africa and armenia in which subjects participate in trust and microfinance games we present evidence that personal trust between group members and social homogeneity are more important to group loan repayment than general societal trust or acquaintanceship between members we also find some evidence of reciprocity those who have been helped by other group members in the past are more likely to contribute in the future during the past decade exploring the role that social capital plays in economic behaviour has emerged as one of the most fascinating and fertile areas of economic research although precise definitions of social capital are notoriously difficult to pin down one of the early pioneers of the concept coleman 1988 defines social capital as social structure that facilitates certain actions of actors within the structure in his definition coleman specifically highlights the roles of mutual obligation expectations and trustworthiness social norms social sanctions and the transmission of information important studies in both developed and developing countries have analysed the impact of social capital in economic relationships putnam s celebrated work making democracy work civic traditions in modern italy 1993 and bowling alone america s declining social capital 1995 brought attention to the role that social capital plays in the development of the modern state udry s ground breaking 1994 work in nigeria illustrated how the social capital existing in traditional societies may allow for more efficient credit contracts than in developed economies with weaker social

wage inflation electoral uncertainty and the exchange rate regime theory and uk evidence the authors extend the rational partisan model of inflation to allow for the effects of unemployment persistence on the dynamics of inflation the authors combine this model with the exchange rate regime model of inflation and examine the experience of the united kingdom outside the fixed exchange rate regime of bretton woods persistently high inflation can be attributed to the failure of political parties to precommit to price stability in the light of unemployment persistence election times are associated with higher inflation with the exception of the thatcher period there is no evidence that the labour party is in general more tolerant to inflation than the conservatives copyright 1992 by royal economic society

environmental policy and macroeconomic dynamics in a new keynesian model this paper studies the dynamic behavior of an economy under different environmental policy regimes in a new keynesian model with nominal and real uncertainty we find the following results i an emissions cap policy is likely to dampen macroeconomic fluctuations ii staggered price adjustment alters significantly the performance of the environmental policy regime put in place iii the optimal environmental policy response to shocks is strongly influenced by the degree to which prices adjust and by the monetary policy reaction

ghg emissions control and monetary policy this paper examines the optimal environmental and monetary policy mix in a new keynesian model embodying pollutant emissions abatement technology and environmental damage the optimal response of the economy to productivity shocks is shown to depend crucially on the instruments policy makers have available the intensity of the distortions they have to address i e imperfect competition costly price adjustment and negative environmental externality and the way they interact

committees as substitutes for commitment in this article policies are negotiated in a committee by playing a dynamic voting game with an endogenous default or status quo policy i show that joining a committee by maintaining a strong agenda setting power is a way for a decision maker to commit to a policy that in absence of committees is not time consistent the disciplinary role of the endogenous status quo and the heterogeneity of preferences within the committee are two crucial ingredients to obtain this result as a motivating example this article focuses on the time consistency of monetary policy

monetary integration uncertainty and the role of money finance this paper considers the positive theory of monetary integration in a general equilibrium monetary model a role for money finance is presented which optimally reduces consumption variability when asset markets are incomplete importantly this role is independent of the aggregate money stock and so does not restrict inflation policy

insider power unemployment dynamics and multiple inflation equilibria this paper incorporates employment dynamics due to insider power into the barro gordon theory of inflation unlike in the static barro gordon case and even though our infinitehorizon model is linear quadratic there can be two markov perfect equilibria so that the same unemployment may correspond to either low or high inflation both equilibrium inflation rates measured per unit of the gap between the insiders and government s employment targets are higher than the corresponding rate in the static case the low inflation equilibrium has intuitive comparative statics properties in that inflation is increasing in insider power and the discount factor but the high inflation equilibrium behaves in the opposite way the highinflation equilibrium can be eliminated by a future precommitment to a fixed inflation regime e g erm but only if this precommitment can be made with certainty contrary to the static model inflation may be lower when the union puts a positive weight on a wage target than when it cares only about employment even when this wage target is consistent with a lower employment level than the employment target

monetary policy cooperation and multiple equilibria abstract we consider international monetary policy regimes in a world of two identical economies characterized by unemployment persistence in the non cooperative regime markov perfect nash equilibrium policies are generally not unique furthermore policies may be asymmetric in this otherwise symmetric model monetary policy cooperation also exhibits multiple equilibria but these are fewer and always symmetric cooperation may be counterproductive or beneficial for either country depending upon the initial non cooperative and resulting cooperative outcome

the effects of monetary policy news and surprises there is substantial agreement in the monetary policy literature over the effects of exogenous monetary policy shocks the shocks that are investigated however almost exclusively represent unanticipated changes in policy which surprise the private sector and which are typically found to have a delayed and sluggish effect on output in this paper we estimate a new keynesian model that incorporates news about future policies to try to disentangle the anticipated and unanticipated components of policy shocks the paper shows that the conventional estimates confound two distinct effects on output an effect due to unanticipated or surprise shocks which is smaller and more short lived than the response usually obtained in the literature and a large delayed and persistent effect due to anticipated policy shocks or news news shocks play a larger role in influencing the business cycle than unanticipated policy shocks although the overall fraction of economic fluctuations that can be attributed to monetary policy remains limited

can news be a major source of aggregate fluctuations a bayesian dsge approach we examine whether the news shocks as explored in beaudry and portier 2004 can be a major source of aggregate fluctuations for this purpose we extend a dynamic stochastic general equilibrium model a la christiano eichenbaum and evans 2005 by allowing news shocks on the total factor productivity and estimate the model using bayesian methods estimation results on the japanese and u s economies show that 1 the news shocks play an important role in business cycles 2 a news shock with a longer forecast horizon has larger effects on nominal variables and 3 the overall effect of the total factor productivity on hours worked becomes ambiguous in the presence of news shocks

social connections and group banking lending to the poor is expensive due to high screening monitoring and enforcement costs group lending advocates believe lenders overcome this by harnessing social connections using data from finca peru i exploit a quasi random group formation process to find evidence of peers successfully monitoring and enforcing joint liability loans individuals with stronger social connections to their fellow group members i e either living closer or being of a similar culture have higher repayment and higher savings furthermore i observe direct evidence that relationships deteriorate after default and that through successful monitoring individuals know who to punish and who not to punish after default

sustaining policy cooperation between economies of different size abstract i consider an example of a two country model featuring national heterogeneity and demonstrate that heterogeneity plays an important role for the countries gains from international policy cooperation and just as important for the incentives to break the cooperative agreement i find that national heterogeneity unambiguously reduces trigger strategies support for policy cooperation in other words the more countries differ the harder it is to sustain policy cooperation

using repayment data to test across models of joint liability lending theories rationalising joint liability lending are rich in implications for repayment rates we exploit this fact to test four diverse models we show that the models repayment implications do not always coincide for example higher correlation of output and borrowers ability to act cooperatively can raise or lower repayment depending on the model data from thai borrowing groups suggest that repayment is affected negatively by the joint liability rate ceteris paribus and social ties and positively by the strength of local sanctions and correlated returns further the relative fit of the adverse selection versus informal sanctions models varies by region

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

financial performance and outreach a global analysis of leading microbanks microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries but high repayment rates have not translated easily into profits for most microbanks profitability though is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy the authors examine why this promise remains unmet for most institutions using a data set with unusually high quality financial information on 124 institutions in 49 countries they explore the patterns of profitability loan repayment and cost reduction the authors find that institutional design and orientation matter substantially lenders that do not use group based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially for these individual based lenders one key to achieving profitability is investing more heavily in staff costs a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost

fiscal news and macroeconomic volatility abstract this paper analyzes the contribution of anticipated capital and labor tax shocks to business cycle volatility in an estimated new keynesian business cycle model while fiscal policy accounts for about 15 of output variance at business cycle frequencies this mostly derives from anticipated government spending shocks tax shocks both anticipated and unanticipated contribute little to the fluctuations of real variables however anticipated capital tax shocks do explain a sizable part of inflation fluctuations accounting for up to 12 of its variance in line with earlier studies news shocks in total account for about 50 of output variance further decomposing this news effect we find permanent total factor productivity news shocks to be most important when looking at the federal level instead of total government the importance of anticipated tax and spending shocks significantly increases suggesting that fiscal policy at the subnational level typically counteracts the effects of federal fiscal policy shocks

volatility and welfare abstract this paper explores the relationship between volatility and welfare even though households prefer smooth streams of consumption and leisure welfare can be increasing in the volatility of an exogenous driving force if factor supply is sufficiently elastic we provide some analytical results for a model without capital and do some quantitative exercises in a model with capital and a variety of shocks welfare is greater in high shock volatility regimes under plausible parameter values augmenting the model with features that increase the elasticity of factor supply extends the range of parameters over which higher volatility results in greater welfare

on the design of a credit agreement with peer monitoring this paper analyses the optimal design of collective credit agreements with joint responsibility first we demonstrate that these agreements can potentially induce peer monitoring reduce the incidence of strategic default and enhance the lender s ability to elicit debt repayments the resulting benefits in terms of extended credit should however be weighted against the higher monitoring effort that such agreements impose upon participant borrowers second we show that the relative benefits from peer monitoring are maximized when risks are positively correlated across borrowers and also when the size of the group is neither too small due to a joint responsibility cost sharing and commitment effects nor too large due to a free riding effect third we compare among different monitoring structures

bargaining a monetary union abstract two governments bargain over the benefits of a monetary union in a cash in advance world a novel feature of the model is that because households trade every period market behavior affects and is affected by the government negotiations as a result in addition to objective costs of delay market expectations about the bargaining outcome emerge as crucial determinants of a monetary union there is a continuum of bargaining outcomes indexed by market expectations some outcomes imply that the monetary union is delayed for an arbitrary number of periods journal of economic literature classification numbers f4 c7

do fiscal spending news shocks generate financial spillovers abstract this paper shows the us fiscal spending news shocks identified using the survey of professional forecasters drive the canadian long term nominal interest rates the news shocks explain about 10 of the canadian long term interest rate at business cycle frequencies

thy neighbor s keeper the design of a credit cooperative with theory and a test economists now appreciate that resource allocation in less economically developed economies is profoundly influenced by non firm economic institutions however our theories of non firm institutions often suggest different answers to many questions including those of policy this paper illustrates a method for discriminating between alternative theories using data from german credit cooperatives from the nineteenth and early twentieth century germany we build a model of credit cooperatives designed to provide monitoring incentives and test this using nineteenth century data authors

which policy is more effective carbon reduction in all industries or in high energy consuming industries from dual perspectives of welfare effects and economic effects abstract carbon emission reduction policy is the main method to curb carbon emissions and tackle climate change however few studies have investigated the effectiveness of carbon emission reduction polices from the welfare and economic perspectives this study establishes a dynamic general equilibrium model with input output structure and compares the effects of emission reduction in all industries and in high energy consuming industries the main conclusions are that carbon emission reduction constraints for all industries have more significant negative impacts on consumption and social welfare compared to emission reduction constraints for high energy consuming industries to be more precisely carbon emission reduction in high energy consuming industries has comparative advantages in maintaining social welfare stability regarding economic effects compared with the carbon emission reduction in high energy consuming industries carbon emission reduction in all industries leads to a larger decline in total output and outputs of most industries however the role of carbon emission reduction in all industries is more significant in promoting employment the carbon emission reduction policies of all industries and high energy consuming industries have strengths in economic effects respectively the findings could provide references for the government to take appropriate measures to promote carbon emission reduction and economic growth

outreach sustainability and leverage in monitored and peer monitored lending abstract i study the contract design problem facing microfinance lending organizations mfos that want to maximize the impact and outreach of their lending activities to a target population of poor borrowers while remaining financially sustainable tradeoffs between outreach sustainability and financial leverage are shaped by the endogenous monitoring and delegation costs that arise within a chain of agency relationships subject to moral hazard between borrowers loan staff mfo equity owners and outside investors all else equal sustainable mfos that target poorer borrowers must charge higher interest rates have higher staff costs per dollar loaned and are less leveraged analysis of data for 72 mfos tends to support the findings

joint liability lending and the peer selection effect we show that the joint liability lending contracts derived in ghatak 2000 violate an ex post incentive compatibility constraint which says that the amount of joint liability cannot exceed the amount of individual liability we derive and characterise optimal separating joint liability contracts incorporating this constraint

emissions targets and the real business cycle intensity targets versus caps or taxes for reducing greenhouse gas emissions intensity targets are attracting interest as a flexible mechanism that would better allow for economic growth than emissions caps for the same expected emissions however the economic responses to unexpected productivity shocks differ using a real business cycle model we find that a cap dampens the effects of productivity shocks in the economy on all variables except for the shadow value of the emissions constraint an emissions tax leads to the same expected outcomes as a cap but with greater volatility certainty equivalent intensity targets maintain higher levels of labor capital and output than other policies with lower expected costs and no more volatility than with no policy

can social cohesion be harnessed to repair market failures evidence from group lending in guatemala the success of group lending in developing countries has been attributed to the ability of the institution to mitigate asymmetric information problems in credit markets previous research has offered a number of explanations for this phenomenon social ties between borrowing group members internal group pressure to repay loans and peer monitoring this research presents empirical tests on borrowing group data from guatemala which indicate that peer monitoring significantly effects borrowing group performance through stimulating intra group insurance group pressure is found to have a small effect in deterring moral hazard while the effect of social ties among members is statistically insignificant

peer monitoring and credit markets a major problem for institutional lenders is ensuring that borrowers exercise prudence in the use of the funds so that the likelihood of repayment is enhanced one partial solution is peer monitoring having neighbors who are in a good position to monitor the borrower be required to pay a penalty if the borrower goes bankrupt peer monitoring is largely responsible for the successful financial performance of the grameen bank of bangladesh and of similar group lending programs elsewhere but peer monitoring has a cost it transfers risk from the bank which is in a better position to bear risk to the cosigner in a simple model of peer monitoring in a competitive credit market this article demonstrates that the transfer of risk leads to an improvement in borrowers welfare

balancing risks from climate policy uncertainties the role of options and reduced emissions from deforestation and forest degradation abstract progressively adjusting climate policies will entail adjustment costs for society this paper develops a conceptual model and numerical example that illustrate the risk associated with exposure to the high costs of complying with future emissions controls and how this risks trades off against that from potentially premature investment into abatement we then highlight the potentially unique role of tropical forest protection in helping to manage these risks by providing a cost effective buffer of near term emissions reductions at a globally significant scale this buffer would provide insurance against the risk of suddenly tightening targets as well as providing other critical environmental benefits we further examine how a version of a private finance instrument in the form of long dated call options on verified reductions in emissions from deforestation and forest degradation i e redd can help to operationalize this risk hedging buffer creation options on redd could aid both regulated businesses and tropical nations to manage their respective risks redd options could deliver sufficient abatement to significantly hedge exposure of regulated entities to potential corrections in climate policy while channeling financial resources to defer deforestation even as climate policies continue to evolve

optimal early action on greenhouse gas emissions in this paper i argue that early action policies that focus on early actual emission reductions will tend to distort abatement investment decisions and thereby inflate the national compliance cost of a greenhouse gas emissions reduction target compliance cost savings stem from well planned early action that may or may not yield early actual emission reduc tions thus policies that target actual emission reductions such as credit for early action or an aggressive early cap and trade program have the potential to be highly distorting sim ulation results from a model calibrated to the canadian economy suggest that the associated welfare losses could be many billions of dollars action optimale dans les debuts quand il s agit de 1 effet de serre ce memoire suggere que des politiques qui tres tot s attaquent a la reduction des emissions de gas creant l effet de serre vont tendre a distorsionner les decisions d investissement pour les reduire et ce faisant accroitre le couit qu il y aura pour le pays a se conformer a des objectifs cibles de reduction des emissions de gas creant l effet de serre la reduction des couits qu il y a a se conformer vient d actions bien planifiees qui peuvent engendrer des reductions des emissions dans les debuts ou non ainsi des politiques qui visent des le depart des reductions au plus vite comme les programmes de credit pour action rapide ou cap and trade peuvent creer de fortes distorsions les resultats d un modele de simulation calibre pour s arrimer a l economie canadienne suggerent que les pertes de bien etre associees a ces distorsions pourraient s elever a des milliards de dollars

participation in a currency union in any voluntary cooperative agreement the potential gain from deviation should determine the minimum influence required over common decision making this paper begins by observing that a highly asymmetric distribution of power between two partners is not sustainable if the choice variables are strategic substitutes it then studies a simple general equilibrium model of a monetary union and shows that a small economy will not take part in the agreement unless it can secure influence that is more than proportional to its size and a transfer of seigniorage revenues in its favor copyright 1992 by american economic association

monetary policy games inflationary bias and openness abstract when a country s central bank has higher output objectives than those of wage setters the noncooperative nash equilibrium contains an inflationary bias which is higher the flatter the economy s aggregate supply curve an economy s openness from the input side is an exogenous observable characteristic that provides a direct way of testing the theory when the imported intermediate goods displace capital labor in production a higher degree of openness flattens steepens the economy s aggregate supply curve and increases decreases the inflationary bias

repayment performance in group based credit programs in bangladesh an empirical analysis abstract this paper analyzes the repayment rates of 128 credit groups belonging to three group based credit programs in bangladesh the association for social advancement asa the bangladesh rural advancement committee brac and the rangpur dinajpur rural service rdrs using tobit analysis specific tests are performed on the following hypothesized determinants group size size of loans degree of loan rationing enterprise mix within groups demographic characteristics social ties and status and occurrence of idiosyncratic shocks the paper concludes that if basic principles of prudential banking are adhered to repayment rates can be good even in poor and remote communities the important thing for financial institutions is to tailor services such that it becomes worthwhile for the poor to establish a profitable long term association in addition more freedom to members in the process of group formation is recommended

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

group lending local information and peer selection this paper analyzes how group lending programs use joint liability to utilize local information that borrowers have about each other s projects through self selection of group members in the group formation stage these schemes are shown to lead to positive assortative matching in group formation faced with the same contract this makes the effective cost of borrowing lower to safer borrowers because they have safer partners conditional on success their expected dues to the lender are lower than that of riskier borrowers the resulting improvement in the pool of borrowers is shown to increase repayment rates and welfare q 1999 elsevier science b v all rights reserved

international fiscal policy coordination and economic growth this paper examines the effects of policy coordination in a two country model of endogenous growth governments choose taxes to provide public inputs and public consumption goods tax rates affect the rewards to investment and rates of economic growth two regimes are examined one with independent policy making and one with policy coordination whatever the regime the choice of public inputs is always efficient without coordination however governments choose inefficient tax rates but taxes may be either higher or lower than under policy coordination as a consequence growth rates may be lower or higher than those under policy coordination copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

anticipated growth and business cycles in matching models in a business cycle model that incorporates a standard matching framework employment increases in response to news shocks even though the wealth effect associated with the increase in expected productivity reduces labor force participation the reason is that the matching friction induces entrepreneurs to increase investment in new projects and vacancies early if there is underinvestment in new projects in the competitive equilibrium then the efficiency gains associated with an increase in employment make it possible that consumption employment output as well as the investment in new and existing projects jointly increase long before the actual increase in productivity materializes if there is no underinvestment then investment in existing projects decreases but total investment consumption employment and output still jointly increase

screening by the company you keep joint liability lending and the peer selection effect we look at an economic environment where borrowers have some information about the nature of each other s projects that lenders do not we show that joint liability lending contracts similar to those used by credit cooperatives and group lending schemes will induce endogenous peer selection in the formation of groups in a way that the instrument of joint liability can be used as a screening device to exploit this local information this can improve welfare and repayment rates if standard screening instruments such as collateral are unavailable

group lending sequential financing lender monitoring and joint liability abstract we develop a simple model of group lending based on peer monitoring and moral hazard we find that in the absence of sequential financing or lender monitoring group lending schemes may involve under monitoring with the borrowers investing in undesirable projects moreover under certain parameter configurations group lending schemes involving either sequential financing or a combination of lender monitoring and joint liability are feasible in fact group lending schemes with sequential financing may succeed even in the absence of joint liability though the repayment rate will be lower in the absence of joint liability however group lending with lender monitoring is unlikely to be feasible

commitment and the adoption of a common currency in contrast to mundell s inquiry on the optimality of currency areas this article aims to understand under what circumstances a pareto dominant monetary union will be established using a multicountry overlapping generations model we highlight gains from monetary union arising from reduced transactions costs and lower inflation despite these gains countries acting independently will impose barriers to exchange through local currency restrictions thereby creating transactions costs and providing an incentive for inflation therefore the gains from monetary union are most likely to be lost without collective effort