habits costly investment and current account dynamics abstract we analyze the current account dynamics for a small country model with habit forming consumers and costly investment the model has several empirical and policy implications i it is consistent with stylized facts regarding the effects of productivity shocks and increases in fiscal spending and regarding the savings investment co movement ii the long run effect of a temporary shock on net foreign assets is often opposite to that of a permanent shock iii under strong habit persistence the welfare dynamics are sluggish so that a beneficial tax financed fiscal policy may have a harmful hangover effect on welfare

the unbalanced uruguay round outcome the new areas in future wto negotiations the uruguay round involved a grand north south bargain the north reduced import barriers particularly in textiles and agriculture the south adopted new domestic regulations in such areas as services and intellectual property changes that would lead to increased purchases from the north in mercantilist economics apples for apples imports for imports in real economics apples for oranges the authors argue that while the north s reduction of import barriers benefits both the north and the south the new domestic regulations adopted by countries of the south could prove costly to those countries to begin with the regulations will be expensive to implement and while the cost side of their impact is secured by a legal obligation in the case of intellectual property rights for example the cost is higher prices for patented goods the benefits side is not so secured

international transfers the relative price of non traded goods and the current account this paper considers the role of the relative price of non traded goods and the current account in the adjustment of a small open economy to the receipt of an international transfer the paper shows that the economy s macroeconomic adjustment to the transfer depends upon the relative capital intensities of the traded and non traded sectors of the economy as well as on the duration of the transfer the paper provides a new interpretation of france s current account surplus in the 1870s that accompanied the payment of reparations to germany following the franco prussian war and of germany s trade deficit in the 1920s that accompanied reparations payments associated with the first world war

optimal growth with many consumers abstract a method is described for constructing all pareto optimal allocations for a dynamic economy with many heterogeneous consumers under certainty in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time optimal perfect foresight competitive equilibrium allocations are obtained through the study of a dynamic program for an economy with one consumption good sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth for a two person exchange economy sufficient conditions are given for the global asymptotic stability of the unique interior stationary point

a serial mixed produce to order and produce in advance inventory model with multiple retailers abstract we formulate a general mixed produce to order and produce in advance inventory model having multiple stocking echelons and multiple retailers we show that the problem to find an optimal inventory policy for such a model with a uniform or a normal demand distribution can be reduced to a general constrained optimization problem

fiscal policies in the world economy this paper uses a two country general equilibrium model of the world economy in order to analyze the effects of budget deficits and government spending on world rates of interest consumption and international indebtedness it demonstrates the difference between the effects of fiscal expenditures and tax cuts as well as between the effects of current policies and expected future policies it is shown that the qualitative effects of fiscal policies depend on whether the country introducing the policies runs a surplus or a deficit in its current account following the positive analysis of the short run and the steady state effects the paper concludes with a normative analysis of the welfare implications of budget deficits

time preference and international lending and borrowing in an overlapping generations model two economies represented by diamond type overlapping generations models and differing only in their pure rates of time preference are joined together capital formation balance of payments behavior and welfare are compared under autarky and openness with a positive natural rate of growth the low time preference country runs a current account surplus in the steady state but not necessarily outside it if preexisting capital is not shiftable between countries integration in the world economy makes the high time preference country worse off in the short run the ranking of stationary utility levels under autarky and openness is ambiguous

distorted agricultural incentives and economic development asia s experience earnings from farming in many low income countries have been depressed by a pro urban bias in own country policies as well as by governments of richer countries favouring their farmers with import barriers and subsidies both sets of policies reduce national and global economic welfare the rapid development of many asian emerging economies has been accompanied by a gradual reduction in their anti agricultural policies but many distortions remain and some countries have moved from negative to positive assistance for farmers following the earlier examples of first japan and then korea and taiwan drawing on results from a new multi country research project this paper examines the extent of these changes relative to those of other developing countries over the past five decades it concludes by pointing to prospects for further policy reform in asia

distributional effects of wto agricultural reforms in rich and poor countries rich countries agricultural trade policies are the battleground on which the future of the wto s troubled doha round will be determined subject to widespread criticism they nonetheless appear to be almost immune to serious reform and one of their most common defenses is that they protect poor farmers the authors findings reject this claim the analysis uses detailed data on farm incomes to show that major commodity programs are highly regressive in the united states and that the only serious losses under trade reform are among large wealthy farmers in a few heavily protected subsectors in contrast analysis using household data from 15 developing countries indicates that reforming rich countries agricultural trade policies would lift large numbers of developing country farm households out of poverty in the majority of cases these gains are not outweighed by the poverty increasing effects of higher food prices among other households agricultural reforms that appear feasible even under an ambitious doha round achieve only a fraction of the benefits for developing countries that full liberalization promises but protect u s large farms from most of the rigors of adjustment finally the analysis indicates that maximal trade led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization

comparing virtue consequentialist and deontological ethics based corporate social responsibility mitigating microfinance risk in institutional voids due to the nature of lending practices and support services offered to the poor in developing countries portfolio risk is a growing concern for the microfinance industry though previous research highlights the importance of risk for microfinance organizations not much is known about how microfinance organizations can mitigate risks incurred from providing loans to the poor in developing countries further though many microfinance organizations practice corporate social responsibility csr to help create economic and social wealth in developing countries the impact of such csr practices remains an underdeveloped area of inquiry we use a normative ethics lens to develop an ethics based csr theory that differentiates between three forms of ethics based csr virtue consequentialist and deontological we argue that while all three forms can help mitigate risk virtue ethics based csr is potentially the most useful form of csr toward mitigating microfinance portfolio risk we test our hypotheses using a sample of microfinance organizations from across the world our findings suggest that virtue ethics based csr is not just an important philosophical paradigm it can actually help mitigate microfinance portfolio risk when implemented in practice

fiscal policy in a simple two country dynamic model abstract this paper analyzes the national and international effects of labor and capital income taxes in a two country infinite horizon perfect foresight neoclassical model with endogenous labor supply and capital accumulation two polar regimes of capital income taxation are considered the source based and the residence based the qualitative effects of labor income taxes are shown to be independent of the taxation regime whereas the effects of capital income taxes are not

deficits and intergenerational welfare in open economies this paper deals with public debt in open economies extending diamond s overlapping generations model to a small open economy as well as an international equilibrium of two large economies it focuses on the intergenerational welfare redistributions caused by an increase in public debt triggered by a temporary government budget deficit and shows how these redistributions differ in open and closed economies the interplay between the deficits in the government budget and the current account is also analyzed it is shown how a single period with a government deficit can be followed by a sequence of periods with a deficit in the current account

inflation and growth impatience and a qualitative equivalence this paper studies the role of an endogenous time preference on the relationship between inflation and growth in the long run in both the money in utility function miuf and transactions costs tc models we establish a qualitative equivalence between the two models in a setup without a labor leisure tradeoff when the time preference is decreasing or increasing in consumption and real balances both the miuf and tc models are qualitatively equivalent in terms of predicting a negative or positive relationship between inflation and growth in a steady state both a decreasing and an increasing time preference in consumption are consistent with the arguments found within the literature while a decreasing time preference in real balances corroborates with empirical evidence there is no evidence in support of an increasing time preference in real balances

fiscal deficits and relative prices in a growing world economy abstract this paper studies the transmission of fiscal disturbances between countries and the effect of those disturbances on worldwide capital intensity in a context of growth the model developed to address these issues allows for the production of both nontradable and relatively capital intensive tradable goods a central finding is that factor markets can be a major channel for the communication of fiscal policy shocks to world interest rates to private saving decisions and ultimately to global asset supplies and their distribution among countries particular predictions of the model illustrate how changes in public debt ratios and shifts in government spending patterns affect resource allocation and the welfare of various generations both at home and abroad

circumvention of trade defence measures and business ethics with the rise of globalization the debate around free trade versus fair trade and liberalism versus protectionism has become increasingly complicated at times the regulations of the world trade organization seem to pit developed markets against emerging markets as governments attempt to expand international trade while at the same time protecting local industry to this end antidumping measures have been extensively developed as a way to block foreign low cost goods often produced in emerging countries from entering domestic markets in response some exporters have begun to circumvent these antidumping measures using strategies such as transhipment assembly operations and slightly modified products while previous studies have addressed the ethical aspects of antidumping measures this study will focus on the ethics of circumvention strategies with a special focus on the theories on legal compliance and specifically civil disobedience and conscientious evasion

the current account in the macroeconomic adjustment process macroeconomic adjustments to changes in the economic environment are to a large extent conditioned by the intertemporal choices of economic agents when agents face an intertemporal budget constraint a decision to alter current indebtedness implies changes in future consumption possibilities and will be based on expectations of the entire future path of key variables and not only current variables a formal model to show how today s current account is a function of both current and future economic variables is presented the determination of the current account under classical assumptions of market clearing and continuous full employment is emphasized

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

real effects of exchange rate volatility abstract in the presence of exchange rate volatility and internationally differing rates of time preference investment in the stock of domestic capital is shown to proceed beyond or to fall short of the point where the marginal productivity equals the respective rate of time preference if the national rate of time preference is comparatively low high the respective country winds up as a creditor debtor internationally upon an increases in exchange rate volatility domestic capital of a debtor country creditor country decreases increases the long run effect of increased exchange rate volatility on the trade balance cannot be determined unequivocally

implementation of ururguay round commitments the development challenge at the uruguay round developing countries took on unprecedented obligations not only to reduce trade barriers but to implement significant reforms both of trade procedures e g import licensing procedures customs valuation and of many areas of regulation that establish the basic business environment in the domestic economy e g technical sanitary and phytosanitary standards sps intellectual property law implementing such reforms are investment decisions in that implementation will require purchase of equipment training of people establishment of systems of checks and balances etc this will cost money and the amounts of money involved are substantial based on world bank project experience in the areas covered by the agreements an entire year s development budget is at stake in many of the least developed countries least developed country institutions in these areas are weak and would benefit from strengthening and reform however the authors analysis indicates that the world trade organization wto obligations reflect little awareness of development problems and little appreciation of the capacities of the least developed countries to carry out the functions that sps customs valuation intellectual property etc regulations address the content of these obligations can be characterized as the advanced countries saying to the others do it my way the authors touch at the beginning on another important point because of their limited capacity to participate in the uruguay round negotiations the wto process has generated no sense of ownership of the reforms to which wto membership obligates them from their perspective the implementation exercise has been imposed in an imperial way with little concern for what it will cost how it will be done or if it will support their development efforts this abstract was borrowed from another version of this item

weakly non separable preferences and the harberger laursen metzler effect we examine the current account effect of a terms of trade deterioration for a small country model incorporating weakly non separable preferences a la shi 1994 under endogenous time preference this enables us to emphasize a welfare change as an important determinant of the current account even with increasing marginal impatience the harberger laursen metzler effect occurs if consumers preference toward imports is sufficiently wealth enhanced in that case a terms of trade deterioration must reduce steady state welfare to shift preference away from imports to exports several empirical implications are also derived jel classification f41 f32 preferences faiblement nonseparables et l effet de harberger laursen metzler l auteur examine l effet sur le compte courant d une deterioration des termes d echange dans un modele d un petit pays quand les preferences sont faiblement nonseparables a la shi 1994 et que la preference temporelle est endogene cela permet de souligner qu un changement dans le niveau de bien etre est un determinant important du compte courant contrairement a ce qu on trouve dans la litterature specialisee meme quand on postule une impatience marginale croissante l effet harberger laursen metzler se produit si la preference des consommateurs pour les importations est suffisamment dependante du niveau de richesse dans ce cas la une deterioration des termes d echange doit reduire le niveau de bien etre en regime permanent de maniere a deplacer les preferences des importations vers les exportations on deduit certaines implications empiriques de ces resultats

implementation and imbalance dealing with hangover from the uruguay round the uruguay round agreements impose bound obligations to implement but provide only unbound promises of assistance is there a legal solution within the wto legal system i e can implementation assistance be made a legal obligation the author concludes that the doha negotiations on trade facilitation and on aid for trade demonstrate that such a legal arrangement cannot be constructed this is not however a problem the international community has provided extensive trade related assistance through bilateral and multilateral development agencies regarding the overall uruguay round imbalance developing countries gave more than they got failure of the international community to acknowledge that the imbalance stems in major part from the wto agreement on intellectual property trips has retarded a general making up

international effects of government expenditure in interdependent economies a dynamic analysis of the international transmission of government expenditure shocks under alternative methods of finance is presented the benchmark case of lump sum tax financing yields an expansion in both the short run and the long run levels of domestic activity while crowding out domestic consumption activity abroad declines in the short run and while it is stimulated during the transition long run activity abroad also declines with capital income tax financing the accompanying distortion outweighs the direct expenditure effects so that all these responses are reversed financing with a tax on labour produces ambiguous responses the welfare implications of these policies are also examined

capital goods imports the real exchange rate and the current account conventional aggregate models of open economies typically rule out trade in capital goods but capital goods account for a major share of the world trade in 1990 they represented more than 40 percent of u s merchandise exports and more than 30 percent of its imports in the same year capital goods imports represented an average of roughly 30 of total imports for 82 industrial and developing countries and almost 9 percent of their gdp this report shows that the presence of imported capital goods greatly changes the short and long run effects of macoreconomic policies and external shocks on key macroeconomic variables using a rational expectations aggregate model with intertemporally optimizing agents and with trade in both consumption and capital goods it finds that the long run equilibrium of the economy displays a negative relationship between the real exchange rate and real output that is a real appreciation is associated with an increase in long run output and the capital stock with investment subject to adjustment costs the response to unanticipated permanent disturbances involves a changing real exchange rate and a non zero current account the author analyzes the macroeconomic consequences of changes in fiscal policy and of transfers of wealth from abroad he show that both have well defined long run effects on the capital stock and real output fiscal expansion in particular may have a long run crowding in effect on investment by constrast the impact of disturbances on the current account is ambiguous the author shows that it depends critically on the degree of intertemporal substitutability in both consumption and investment with the latter measured by the magnitude of investment adjustment costs

aggregate spending and the terms of trade is there a laursen metzler effect this paper investigates the spending and current account effects of terms of trade shifts in a model where households maximize utility over an infinite planning period in the framework developed here an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated permanent worsening in its terms of trade the paper s model thus provides a setting in which the current account deficit predicted by laursen and metzier harberger and others fails to materialize

responsibility in paradise the adoption of csr tools by companies domiciled in tax havens in contrast to the recent rise to economic importance of offshore finance centres ofcs the topic of taxation has so far created little interest among scholars of corporate social responsibility csr this paper makes two contributions to addressing this lacuna applying a range of influential normative theories of ethics it first offers an ethical evaluation of tax havens second the paper examines what use large firms that are headquartered in two ofcs bermuda and the cayman islands make of formal csr tools the emerging duplicity in tax haven based companies professing social responsibility highlights once more the political nature of csr where at least some firms and or industries can successfully limit government power to enact regulation as well as shape the discourse around csr the study of csr in ofc based firms thus calls into question the usefulness of the often quoted definition of csr as going beyond the law

trade imbalance and domestic market competition policy this study investigates the effect of a country s suppression of competition in its market for nontradables it assumes that the initial equilibrium is stationary and demonstrates that if competition is suppressed in a small country the country s trade surplus increases in the short run in the large country case the same change creates an excess demand for future tradables and affects the relative price between present and future tradables using a two country model the study shows that this price change redistributes real wealth from the country with a trade deficit to the country with a trade surplus

the real exchange rate the capital stock and fiscal policy abstract this paper studies the joint determination of aggregate supply the real exchange rate and the current account in response to changes in government spending in a model where there is no uncertainty in the aggregate but where individuals are uncertain about their lives duration international capital mobility fixes the steady state capital stock and aggregate supply in a small country whereas in a large country the steady state capital stock is endogenous an increase in government spending is more likely to generate a real exchange rate depreciation in a small country since the loss of wealth associated with cumulated current account deficits does not increase rest of the world spending in the case of a large country current account deficits are wealth transfers to the rest of the world and increase foreign spending thus the normal long run response is an increase in the relative price of domestic output

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

the chilling trade effects of antidumping proliferation advocates of antidumping ad laws downplay their negative effects by arguing that the trade flows that are subject to ad are small and their distortions negligible but while the adverse effect of ad on product level trade has long been established the question remains whether there are trade effects at the aggregate level the recent proliferation wave of ad laws and their use provides us with a unique policy change to estimate the true trade effects of adopting and enforcing ad laws for this purpose we estimate the effect of ad on bilateral trade flows between the new adopters of ad laws and their trade partners using a gravity model of annual observations 1980 2000 our estimates show that ad has trade chilling effects on aggregate import volumes but the impacts are heterogeneous across sectors we find that new tough users experience a chilling of their aggregate imports of 14 billion us a year or 5 9 as a result of ad measures for some countries like mexico and india the dampening effects of ad laws on trade flows are found to substantially offset the increase in trade volumes derived from trade liberalization

redistributive taxation in a small open economy this paper studies the effects of redistributing the tax burden across households on the current account the set up is a dynamic small open economy with infinitely lived households that have perfect foresight it is shown that the different speeds at which households adjust consumption levels to their long run values may cause nonmonotonic transient paths

the international transmission and effects of fiscal policies in recent years the world economy has been subject to large and unsyncronized changes in fiscal policies high and volatile real rates of tnterest large fluctuations in real exchange rates and significant variations in private sector spending this paper reviews some of the key facts characterizing the effects of fiscal policies during the first half of the 1980s and provides a simple analytical framework suitable for the interpretation of these facts the analytical framework builds on a two country model of the world economy which is applied to the analysis of the transmission and effects of various changes in the time profile of taxes and of government spending generally the predictions of the model concerning the relation among the intercountry patterns of consumption long and short term real rates of interest real exchange rates and fiscal policies are consistent with the stylized facts this abstract was borrowed from another version of this item

a simple dynamic general equilibrium model abstract we analyse a single sector economy with h 1 infinitely lived agents that operate in a continuous time framework utility functions are recursive but not additive both efficient and perfect foresight competitive equilibrium allocations are considered the existence and stability of such allocations are investigated locally i e in a neighbourhood of steady state allocations the model is shown to be useful for explaining the distribution of wealth and consumption across agents and for analysing the way in which wealth redistribution can affect the dynamics of aggregate economic variables

stock markets adjustment costs and the international transmission of shocks this paper studies the role of stock markets and adjustment costs in the international transmission of supply shocks it uses an analytically tractable two country one good model where intertemporal optimizing behaviour of infinitely lived agents endogenously determines the rate of capital accumulation and the current account it is shown that the presence of adjustment costs and stock markets provide new insights concerning the channels through which supply shocks are internationally transmitted

population ageing and pension reform in a small open economy with non traded goods in this paper we study the implications of population ageing in an economy with a sizeable non traded goods sector to this effect a highly stylized micro founded macro model is constructed in which the age structure of the population plays a non trivial role the model distinguishes separate birth and death probabilities thus allowing for net population change allows for age dependent labour productivity thus mimicing life cycle saving and includes a rudimentary pension system thus allowing for intergenerational redistribution the model is used to analytically study demographic and pension shocks

concurrent pricing and lot sizing for make to order contract production abstract this paper develops a model for the simultaneous i e concurrent determination of the inventory and pricing policies of a supplier which produces and supplies a product to a buyer on the basis of a contractual agreement calling for the delivery of a specific quantity periodically assuming that the customer is rational i e it follows its own optimal purchasing policy the objective of the supplier is to determine the product s selling price in conjunction with an appropriate production inventory policy so that a predetermined gross profit level is achieved it is further assumed that the supplier s production batch size is an integer multiple of the buyer s order quantity in formulating a mathematical model of this situation the interactions between the product s price the buyer s economic order quantity and the supplier s selling price costs and profit are taken into account for solving this model a simple iterative algorithm is proposed which is illustrated through a numerical example sensitivity analysis performed on the model demonstrates that it is relatively robust and quite insensitive to errors in estimating the buyer s ordering to carrying cost ratio on the part of the producer

real asset returns inflation and activity in a small open cash in advance economy abstract the effects of inflation are worked out for a small open economy with cash in advance cia constraints on bond purchases if all transactions are subject to cia constraints an increase in the inflation rate will reduce savings bringing about a current account deficit while the capital stock will be unaffected if investment is not subject to cia constraints an increase in the inflation rate will encourage investment and reduce savings bringing about a current account deficit numerical evaluation of the model gives rise to falls in real interest rates that are in line with recent empirical findings

why should trade negotiators negotiate about in recent years there have been growing demands to make trade liberalization contingent on adoption of common labor and environmental standards the straightforward economic answer is that this makes little sense neither the gains from trade nor the gains from appropriate regulation are compromised if other countries impose standards that are weaker than your own it is possible to offer second bet economic rationales for harmonization but these are empirically unconvincing the only serious argument in favor or regulation is political that regulation which is in the national interest may not be politically feasible unless other countries do the same

government spending and the real exchange rate i study the effect of government spending on the real exchange rate in an open economy version of the sidrauski model with a time varying rate of time preference that introduces complementarity between consumption at different points in time i show that a balanced budget fiscal expansion causes a real depreciation and a current account surplus if the expansion falls on traded goods if the increase falls instead on nontraded goods both the stylized results of a real appreciation and a current account deficit and the perverse result of an appreciation and a surplus can occur

food safety issues trade and wto rules a developing country perspective the sps agreement and the related wto dispute settlement mechanism are an important first step in strengthening the global trade architecture bringing in greater transparency and orderly conditions to world food trade however implementation of the new trade rules has turned out to be a more complex task than the traditional market access issues handled by the wto several factors including inadequate financial and technical resources have constrained devel oping countries from becoming effective participants in the implementation process and there is widespread suspicion that sps regulations are being used as hidden protectionist devices by developed countries however despite all the problems some developing countries have been quite successful in penetrating developed country food markets they have done so by accepting the consumer preferences and standards in quality sensitive high income markets and implementing domestic supply side measures while making full use of available international assistance initiatives developing countries should view the task of complying with sps standards not just as a barrier but also as an opportunity to upgrade quality standards and market sophistication in the food export sector

the global stability of efficient intertemporal allocations this paper describes a continuous time model of an economy with finitely many infinitely lived consumers and a finite number of capital goods two objectives are achieved first recursive nonadditive utility functionals are formulated and analyzed second these preference functionals are applied to analyze the nature of efficient allocations in a dynamic economy two classes of global turnpike propositions are proven which provide the basis for a model of the long run distribution of wealth these propositions also provide new perspective regarding existing stability literature based on additive utilities copyright 1987 by the econometric society

the rate of time preference and dynamic economic analysis strong restrictions on the structure of preferences are a central feature in the received theory of intertemporal allocation in fact most of the modern literature concerned with capital theoretic problems represents preferences by a functional in which an additive utility function is discounted by a constant rate of time preference this specification is attractive because it is analytically tractable in dynamic models and it clearly delineates how tastes and opportunities interact to determine an economy s household s paths of consumption and capital formation however its rigid structure constancy of time preference severely limits the conclusions and explanatory power of the corresponding models this paper considers a class of utility functionals in continuous time which have the appealing feature that the rate of time preference depends systematically on an index of aggregate future consumption the more flexible structure embodied in these functionals leads to important generalizations and

capital controls and international trade finance abstract this paper studies the effects of prohibiting individuals from holding foreign assets but of allowing firms to trade in foreign assets only up to what is needed to finance export and import activities although firms can perform arbitrage between domestic and foreign financial markets the distortions in asset markets are not fully arbitraged away but instead are transmitted to domestic goods markets the dynamics and steady state responses to a variety of shocks are crucially affected by capital controls even in the presence of capital controls the volatility of domestic interest rates can be substantial

the harberger laursen metzler effect under capital market imperfections abstract this paper re examines the effects of a permanent terms of trade change on a dynamic small open economy facing an imperfect world capital market as studied in obstfeld 1982 aggregate spending and the terms of trade is there a laursen metzler effect quarterly journal of economics 97 251 270 which assumes that the economy faces a downward sloping bond curve the novelty of the present paper is that a saddle path stable steady state comes into existence under the assumption that households subjective discount rate is a decreasing function of instantaneous utility the harberger laursen metzler hlm effect is shown to hold unambiguously i e an unanticipated permanent terms of trade deterioration leads to an increase in aggregate expenditure and a current account deficit this result is in stark contrast to those obtained in obstfeld 1982 aggregate spending and the terms of trade is there a laursen metzler effect quarterly journal of economics 97 251 270 and many other studies in the literature

why is it so difficult trade liberalization under the doha agenda many explanations have been offered for the current difficulties of the world trade organization wto in fact the system appears to have managed many of these challenges reasonably well including the increase in the number of members its mediaeval decision making procedures the changing geopolitical environment the rapid growth of preferential trade arrangements ptas the complexity of its agreements and concerns about erosion of unilateral preferences by contrast the near exhaustion of the traditional fuel of industrial country non agricultural tariffs the increasing importance of non trade concerns and incomplete adjustment to a new multi polar negotiating system appear to be important factors requiring further examination

weakly nonseparable preferences and distortionary taxes in a small open economy this paper examines the dynamic effects of distortionary taxes in a small open economy the employed utility function implies both endogenous rates of time preference and a tractable form of weak nonseparability between consumption and leisure weak nonseparability induces novel long run welfare and wealth effects of taxes and generates very different current account movements endogenous rates of time preference facilitate the examination of a tax on international borrowing and lending copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

optimal growth with decreasing marginal impatience abstract this paper analyses the long run dynamics of a continuous time infinite horizon optimal growth model with identical households where the households rate of time preference is endogenously determined however unlike the existing literature we assume that households have decreasing marginal impatience i e the instantaneous discount rate is negatively related to the current consumption with this assumption we analyse the stability and uniqueness of the long run equilibrium we show that contrary to the general belief a negative relationship between the instantaneous discount rate and the household s current consumption does not necessarily result in instability of the dynamic system however even a stable system may be characterized by multiple equilibria so that the initial condition becomes important in determining the long run behaviour of the economy we derive a set of sufficient conditions for stability and uniqueness in this context

decreasing and increasing marginal impatience and the terms of trade in an interdependent world economy abstract using a two good two country model we examine macroeconomic adjustment by allowing for decreasing and increasing marginal impatience dmi and imi in the reference case where both countries have imi a negative output shock in one country lowers the interest rate and both countries welfare levels in steady state whereas when either one country has dmi the negative income shock raises the interest rate thereby benefiting the imi country and harming the dmi one in steady state in a country either with imi or dmi the harberger laursen metzler effect takes place if negative welfare supporting effects dominate positive income compensating effects

temporary and permanent government spending in a small open economy abstract this paper studies a dynamic optimizing small open economy model that emphasizes the supply side responses of labor and capital to changes in fiscal policy the model used generates results that are consistent with a number of empirical regularities in small open economies furthermore temporary fiscal shocks are shown to have permanent positive effects on output and negative effects on consumption and welfare the strength of these effects are shown to depend on intertemporal elasticities of substitution and the persistence of policies

accumulation and growth in a two country model a simulation approach abstract this paper analyzes saving and capital accumulation in a two good growth model of two market economies in which economic agents optimize with perfect foresight the goal is to present a model in which short run dynamics and the steady state are soundly integrated we stress the importance of asset markets as the linkage that transmits disturbances both internationally and intertemporally while many components of the model described below can be found in the literature on optimal consumption investment and international growth models we provide a consistent synthesis our framework permits the analysis of structural adjustment in the global economy and the dynamic effects of a wide range of public policies

exchange rate mean reversion from real shocks within an intertemporal equilibrium model abstract the post bretton woods era has been characterized by real exchange rates that exhibit mean reversion with mixed evidence as to whether this reversion is partial ppp never holds or essentially complete this paper generates these stylized facts theoretically by synthesizing a simple intertemporal open economy model with the elasticities approach to the current account a central feature of the model is the existence of non traded goods the model can generate partial or approximately complete mean reversion for the real exchange rate depending on parameter values if innovations in output are made up of permanent and temporary components in addition temporary output shocks generate a type of hysteresis wherein the short run path for the exchange rate permanently alters its long run equilibrium value

demographic structures savings and international capital flows abstract this paper investigates how the different demographic characteristics of two countries will drive the flow of capital between them as inhabitants of the longer lived nation have a higher savings rate than do those with the shorter lifespan it is motivated by the recent us experience during which its net foreign asset position declined dramatically while simultaneously its longevity has fallen increasingly below that of other developed g7 economies our contribution is to address the issue by introducing empirically based survival mortality functions into a traditional two country macrodynamic framework in doing so we eliminate some of the unsatisfactory aspects associated with the traditional two country representative agent model the sensitivity of the capital flows and the resulting net foreign assets of the two economies to key structural characteristics and their consequences for savings are emphasized

welfare costs of the u s antidumping and countervailing duty laws abstract the antidumping ad and countervailing duty cvd laws in the united states have become the most pervasive form of import relief sought by domestic producers this paper estimates the collective economic effect of the hundreds of active u s ad cvd orders using a computable general equilibrium model we estimate that the collective net economic welfare cost in 1993 of these orders to be 4 billion this welfare estimate is sensitive to various modeling assumptions which are explored in the paper with the implementation of the uruguay round agreements the ad cvd laws remain one of the costliest programs restraining u s trade

the effects of farm subsidies on farm exports in the united states we estimate the elasticity of u s farm exports to u s farm subsidies using a gravity model of state level farm exports to 100 major trading destinations for the period 1999 to 2011 our identification strategy exploits the within state variation that is free of endogeneity bias in the levels and trends of farm subsidies and farm exports we find that a 1 decrease in farm subsidies would reduce u s farm exports by 0 40 per annum this equivalently means that the complete abolishment of the farm subsidy program would reduce u s farm exports by approximately 15 3 billion per year importantly we document robust evidence that amber box subsidy programs such as counter cyclical payments and marketing loan gains have the strongest effect on farm exports while green box subsidy payments such as direct payments have negligible effects finally subsidy payments affect exports only in agricultural commodities not in livestock our subsidy elasticity estimates are statistically significant stable and economically meaningful and are vitally needed by u s and global policymakers in the face of critical domestic and international developments

effects of government spending on the current account with endogenous time preference this paper extends a previous model to set up a small open economy with perfect capital mobility and examines the effects of an unanticipated permanent rise in public spending on the optimal rates of private consumption and the current account the novelty of the paper is consideration of the relationship between private and public consumption in the household s utility function as well as endogenous rates of time preference it is found that the key factor determining the adjustment patterns of private consumption and the current account is the marginal utility of private consumption and of public spending which results from endogenous recursive preferences

capital accumulation and the current account in a two country model abstract this paper examines the joint determination of international debt and capital accumulation in a two country model national rates of time preference are endogenous adjusting along an optimal path to come into equality with one another in the steady state the characteristics of short run current account dynamics are crucially linked to world capital accumulation and to a country s long run net external asset position steady state creditor countries tend to have current account surpluses during episodes of world output growth and vice versa for debtor countries this gives rise to possible non monotonic adjustment in the current account and consumption

firm performance under just in time and traditional proxies for profit maximization abstract when the profit function is too complex to maximize directly firms must rely on some other performance criterion to guide work station activity simplification is achieved by emphasizing either flow or stock management flow management seeks to ensure that no work station is starved by available inputs stock management seeks to minimize inventories this paper develops a model to assess the performance of these two approaches for a firm that can carry both input and output inventories the model includes shocks to both demand and production and the possibility of a stockout is explicitly reflected in the optimization problem stock management dominates flow management when carrying costs are sufficiently large when carrying costs are moderate the strategy of simply ignoring shocks to demand and capacity dominates both stock and flow management the flow management approach is superior only when carrying costs are very small

developing countries in the wto system applying robert hudec s analysis to the doha round in his 1987 developing countries in the gatt system robert hudec concluded that the identity of developing countries in the gatt system was primarily a matter of their demanding non reciprocal and preferential treatment developed countries responding grudgingly to those demands and that this situation had been unfruitful either to support developing country reforms or to discipline developed country restrictions aimed at developing countries hudec was pessimistic about the relationship becoming more productive but his expression of despair offered a glimmer of hope there are those who believe that the gatt has become so committed to the current policy that the only way to change it would be to start a new organization a new organisation was started the world trade organization but has the wto achieved what hudec hoped a new organisation might at the 1987 95 uruguay round developing country leaders acted as hudec had hoped they used international rules and bindings as leverage to support their own internally driven reforms to overcome generations of accumulated protection to lock in reforms against the backsliding that had undone previous reforms dealing with the uruguay round s unbalanced outcome and the overlapping implementation problem have shaped the doha round but the negotiations have misconceived and mismanaged both issues rather than seeking to identify their real economics the negotiations have gone back to the traditional idea of special and differential treatment perhaps the largest cost of this mismanagement is that in many developing countries the unilateral momentum for liberalisation has waned to the extent that the doha negotiations have drawn attention away from the domestic issues that were the basis of developing country liberalisation and enhanced the status of negotiators relative to the leaders who fought at home for reform they have contributed to that waning

the impact of eu export refunds on the african continent an impact assessment abstractthe eu s export refund policy has long been a source of controversy for its perceived impacts on third country markets however the eu commission maintain that these concerns are largely historic as cap reforms mean that export refunds are now used infrequently the purpose of this article is therefore to assess the impacts of refunds in the wake of the 2003 reform of the cap using two complementary analyses first an analysis using a computable general equilibrium model and second two case studies to assess the potential impact of export refunds in selected african developing countries

adjustment costs in investment time preferences and the current account abstract this paper studies the effects of supply and demand shocks on the optimal investment and savings decisions of economic agents in a small open economy the two building blocks of the setup are adjustment costs in investment and a recursive time preference structure it is shown that the model can mimic certain stylized facts

capital controls and fiscal policy in the world economy an intertemporal utility maximization framework is employed to model a world economy with capital controls the effects of fiscal policy in such an environment are examined several results emerge concerning the international transmission of fiscal policy under capital controls and the nature of comovements in macro economic aggregates such as output employment consumption and investment some of the paper s other results concern the implications of capital controls for ricardian equivalence the role of financing decisions in the international transmission process under capital controls and the effect of capital controls on the magnitude of fiscal induced fluctuations throughout the world economy contr6les des mouvements de capitaux et politique fiscale dans l conomie mondiale les auteurs utilisent une approche par la maximisation intertemporelle de l utilite pour modeliser une economie mondiale dans laquelle des controles sur les mouvements de capitaux existent ils examinent les effets de la politique fiscale dans un tel contexte on tire de ces analyses plusieurs resultats quant i la transmission internationale des effets de la politique fiscale et quant aux mouvements lies de certains agregats economiques comme les niveaux de production d emploi de consommation et d investissement certains autres resultats de cette analyse ont trait aux implications des controles des mouvements de capitaux sur l1 quivalence ricardienne au role des decisions de financement dans le processus international de transmission quand il y a controle des mouvements de capitaux et aux effets des controles sur les mouvements de capitaux sur la magnitude des fluctuations induites a travers l economie mondiale par la politique fiscale helpful comments from two anonymous referees are gratefully acknowledged discussion in workshops held at ucla duke university iowa state university queen s university vanderbilt university vpi and the university of western ontario has also been useful canadian journal of economics revue canadienine d economique xviii no 4 november novembre 1985 printed in canada imprime au canada 0008 4085 85 743 65 1 50 canadian economics association this content downloaded from 207 46 13 129 on mon 27 jun 2016 05 25 03 utc all use subject to http about jstor org terms 744 jeremy greenwood and kent p kimbrough

special and differential treatment of developing countries in the wto moving forward after cancun the issue of special and differential treatment sdt for developing countries in the wto has become a source of tension in north south trade relations the absence of an effective sdt regime clearly contributed to the failure of the cancun ministerial meeting of the wto this paper argues for a new approach that puts the emphasis on efforts to improve the development relevance of wto rules and create mechanisms which allow greater differentiation across wto members in determining the applicability of wto disciplines complemented by non discriminatory liberalisation of trade in goods and services in which developing countries have an export interest the former is key in allowing the wto to expand its reach to new behind the border policies and the latter is important to establishing a development dimension in multilateral trade negotiations

habit formation adjustment costs and international transmission of fiscal policy abstract the paper studies the effects of fiscal policy in an integrated world economy the setup is one with habit forming endogenous rates of time preference and adjustment costs in investment most of the predictions of the model are in line with the recent empirical literature on fiscal policy for instance in response to a balanced fiscal expansion we obtain positive long run output multipliers long run increases in employment short and medium run increases in wages and decreases in investment our results suggest that short run government spending multipliers are smaller than tax multipliers most importantly we show that the model can generate positive short and medium run consumption responses to a positive fiscal shock this is relevant as negative consumption responses are considered to be one of the main challenges facing neo classical models of fiscal policy

how decoupled is the single farm payment and does it matter for international trade the extent to which decoupled agricultural support including the european union single farm payment sfp creates production incentives remains unclear we apply an extended version of the standard global trade analysis project model and generate a set of 21 databases that captures a comprehensive representation of domestic support by considering and modeling a range of different assumptions regarding the sfp s degree of decoupling we investigate the sfp s effect on the model s results the results of our analysis reveal substantially different effects that depend on the degree of decoupling and the findings can help validate trade analysis results particularly for developing countries

technical regulations and specialization in international trade abstract it is widely acknowledged that while technical regulations can improve welfare and facilitate markets they can also impede trade the trade impeding effects of technical regulations are especially worrisome for developing countries they frequently lack the human and capital resources necessary to satisfy technical measures and thus are more likely to be excluded from markets by technical measures this paper uses highly disaggregated us data on agricultural mining and manufacturing imports to examine the impact of technical regulations on trade patterns using instrumental variables estimation to correct for the potential endogeneity of technical regulations the analysis suggests that technical regulations substantially impinge on poor countries exports their weaker capacities to satisfy technical regulations lead them to specialize away from industries with heavier regulatory burdens

saving two in a billion quantifying the trade effect of european food safety standards on african exports abstract a growing concern over health risks associated with food products has prompted close examination of sanitary and phytosanitary standards in industrialized countries this paper quantifies the impact of a new harmonized aflatoxin standard set by the eu on food exports from africa we employ a gravity model to estimate the impact of changes in differing levels of protection based on the eu standard in contrast to those suggested by international standards the analysis is based on trade and regulatory survey data for 15 european countries and nine african countries between 1989 and 1998 our results suggest that the implementation of the new aflatoxin standard in the eu will have a negative impact on african exports of cereals dried fruits and nuts to europe the new eu standard which would reduce health risk by approximately 1 4 deaths per billion a year will decrease these african exports by 64 or us 670 million in contrast to regulation set through an international standard

real interest rates home goods and optimal external borrowing the paper investigates the optimal time path of consumption and external borrowing in the dependent economy model the small country faces given world prices and a given world real interest rate the presence of a home goods sector implies that the relevant real interest rate appropriate to consumption decisions depends on the rate of change of the real price of home goods the paper shows how transitory disturbances in output or in the world real interest rate affect the time profile of consumption and the trade balance in particular it is shown that the presence of a home goods sector dampens the consumption effects of changes in the world interest rate

agricultural export subsidies and domestic support reform under the wto system what does it mean for welfare in west africa this paper analyses the potential welfare impacts west africa tends to encounter from liberalising agricultural export subsidies and domestic support in developed and developing countries according to the reform proposals of the doha development agenda we base our analysis on the july framework scenario which considers a tiered formula that adopts a harbinson approach plus sensitive and special product provisions the results indicate that while the world prices of the major exportable commodities of the region will fall those of their imports will rise subsequently consumers of nearly all of the commodities analysed encounter potential welfare losses while almost all producers of these commodities experience potential welfare gains consumers are expected to encounter an aggregate loss of about 591 93 million while a net producer surplus of about 423 78 million is expected to be generated however because the gains by producers are insufficient to compensate consumers losses the fifteen west african nations considered in the analysis are expected to experience a net welfare loss of about 168 16 million on the contrary large developing countries such as brazil india and china as well as developed nations like the eu and japan are expected to enjoy net welfare gains the net losses accrued to the region imply more poverty and heightened food insecurity as all west african countries faced severe hunger situation in 2010 however even though these findings conform to other research results indicating net food importing countries will become losers from agricultural trade reform while net food exporters experience welfare gains concerns of data quality and reliability that are usually associated with macrolevel analysis render these results more indicative than definitive

an ethical and legal synthesis of dumping growing concerns in international marketing international law holds that a firm is dumping if its foreign price is either below its domestic price or below its marginal cost domestic firms often claim that a low cost foreign firm is engaged in a long run strategy to destroy the domestic industry and harm domestic consumers dumping is a permanent feature of marketing strategies of numerous companies and anti dumping complaints are increasingly resorted to as a defensive instrument to stop the challengers this article offers a synthesis of ethical and legal issues involved and relates them to marketing concerns in international operations what is the current state of dumping legislation what concern over personal ethics should a manager have using teleological and deontological philosophies of ethics the argument is made that the marketing manager who set very low prices for an international market is not behaving unethically

public sector deficits international capital movements and the domestic economy the medium term is the message this paper reviews conventional wisdom and explores recent developments concerning the implications of large and persistent public sector deficits in an open economy consideration is given first to the mundell fleming model and its analysis of fiscal policy in an open economy this leads to an extensive discussion of the nature of international capital mobility and its importance for the mundell fleming results the burden of the public debt in an open economy is then argued to be an important issue even in a world of perfect international capital mobility the final substantive section addresses the related problems of co ordination consistency and credibility of government policies it is concluded that a desirable fiscal plan must strike a balance between long run and short run issues les deficits du secteur public les mouvements internationaux de capital et leconomie domestique le moyen terme voila le message ce memoire presente une revue de ce que suggere la sagesse conventionnelle en plus d explorer certains developpements recents des debats sur les implications de deficits importants et persistants du secteur public dans une economie ouverte une attention particuliere est accordee au developpement et a certaines extensions du modele de mundell fleming l auteur analyse ensuite la nature de la mobilite intertiationale du capital et son importance dans l analyse de la politique fiscale on etudie aussi le fardeau de la dette publique dans une economie ouverte et les dernieres sections traitent des problemes connexes de coordination de coherence et de credibilite des politiques gouvemementales l auteur en arrive a la conclusion qu un plan fiscale desirable doit trouver un equilibre entre les considerations de courte et de longue periodes the 1985 harold innis memorial lecture presented at the canadian economics association annual meetings in montreal 29 may 1985 it is a pleasure to acknowledge many useful discussions on the issues addressed in this lecture with david backus robin boadway michael devereux richard lipsey and especially neil bruce john helliwell s advice and encouragement is also very much appreciated michael parkin made a number of very useful editorial suggestions canadian journal of economics revue canadienne d economique xviii no 4 november novembre 1985 printed in canada imprime au canada 0008 4085 85 723 42 1 50 canadian economics association this content downloaded from 207 46 13 76 on wed 24 aug 2016 06 07 46 utc all use subject to http about jstor org terms 724 douglas d purvis

luxury and wealth i develop a dynamic theory of luxury consumption particularly emphasizing the causal effect that pursuit of luxury goods has on wealth accumulation a quasi luxury is defined as a good whose marginal rate of substitution is increasing in a utility index under certain conditions it is indeed a luxury good when current wealth holding falls short of exceeds long run needs luxury consumption is postponed more less easily than necessity consumption due to a lower higher time preference for luxury and or a higher intertemporal elasticity of substitution thereof preferences for quasi luxuries lead to a higher steady state value of wealth or capital

fairness in international trade negotiations developing countries in the gatt and wto does fairness matter in the hard bargaining and horse trading that is associated with trade negotiations this paper presents a positivist analysis of the particular concepts of fairness that developing countries have appealed to in their trade negotiations within the auspices of the gatt and wto how these notions have evolved and the impact that they have had on negotiated outcomes treating the concept of fairness as my central dependent variable i argue that the notion of fairness can only be understood in terms of the institutional context it is embedded in which includes institutional structure as well as the participatory processes that underlie it i advance three hypotheses on the relationship between institutional context the fairness discourse and the influence and manoeuvre that member countries can have in shaping that discourse focusing on the role of fairness in the negotiation positions of developing countries i explain its substance and evolution through learning and adaptation by these countries within the very particular institutions of the gatt and the wto and the coalitions they form a part of and interact within

borrow and adjust fiscal policy and sectoral adjustment in an open economy should the government run fiscal deficits in response to an adverse external shock that warrants transfer of resources from production of nontraded to traded goodsq this article considers normative fiscal policy implications of sectoral adjustment costs in a two sector model with overlapping generations fiscal deficits benefit present generations by depleting foreign assets and slowing down the adjustment process we show that despite no nominal rigidities temporary fiscal deficits increase social welfare if adjustment costs prevent immediate sectoral reallocation of inputs if there are no adjustment costs the case for fiscal deficits vanishes copyright 2003 by the economics department of the university of pennsylvania and osaka university institute of social and economic research association

channels of international policy transmission abstract four channels of international budgetary and monetary policy transmission are analysed within the context of nominal wage sluggishness the first is based on capital gains on holdings of foreign assets spill over effects arising through the second and third channels depend on whether home and foreign goods are gross substitutes or gross complements and on whether the elasticity of intertemporal substitution is less or greater than one the final channel assumes finite lifetimes and no bequest motive it departs from debt neutrality in order to give a non trivial role to wealth effects and current account dynamics

macroeconomic policy exchange rate dynamics and optimal asset accumulation the paper develops a model of exchange rate and current account determination for a small economy peopled by infinitely lived utility maximizing households in this setting a central bank purchase of foreign exchange has no real effects when central bank foreign reserves earn interest at the world rate and proceeds are returned to the public in contrast an increase in the monetary growth rate does have real effects even in the long run the model developed here implies that an increase in government spending may lead to a surplus on current account the external adjustment process predicted by the model is one in which consumption real balances and external assets all rise or fall simultaneously