intra annual sheep price patterns and factors underlying price variations in the central highlands of ethiopia a sheep market survey was undertaken to determine the effects of certain animal and market characteristics on price and the pattern of sheep prices in relation to seasons nine key ethiopian central highlands markets were surveyed for a period of one year in 1989 each market was surveyed once a week on the main market day price weight sex age colour condition score breed type and buyer s purpose were recorded for all completed transactions as well as the numbers offered and sold on each market day a total of 50 062 cases were recorded three markets each representing redistributive intermediate and terminal markets as identified by the distribution in buyer s purpose were chosen for further analysis considerable weekly price variation was evident in these markets prices were also seasonal with higher premiums paid during some religious festivals animal characteristics weight age condition sex colour as well as buyer s purpose and seasons were variably important in explaining variation in price among animals within weeks variations in the composition of these characteristics from week to week were among factors underlying changes in weekly mean prices r2 varied from 0 2659 to 0 3583 in the quadratic price per kg model and from 0 7822 to 0 8413 in the quadratic price per head model in the three markets however it was found that price per head was predicted equally well overall by estimated price per kg multiplied by actual weights and that because of wide variation in weights both within and between weeks price per kg is more useful market information

boom and bust cycles external imbalances and the real exchange rate when the current account balance and net capital outflows do not exactly offset each other international payment flows arise payment flows into a country push the real exchange rate up payment outflows push it down this article uses a model of optimal consumption and portfolio choice to determine the factors that drive international payment flows during boom and bust cycles it shows that during such episodes capital inflows first exceed the deficit on current account strengthening the currency later on when the return on domestic capital reverts to its normal level the current account recovers yet the overall decline of the net foreign asset position provokes a fall of the real exchange rate even below its initial level case studies of countries experiencing rapid economic expansions followed by economic and financial meltdowns confirm the article s theoretical predictions

regulatory discretion and the unofficial economy johnson kaufmann and shleifer 1997 find that the share of the unofficial economy in gdp is determined by the extent of control rights held by politicians and bureaucrats in post communist economies exploring in more detail the role of bribes and using a broader data set from the oecd latin america and transition economies we find that the unofficial economy accounts for a larger share of gdp when there is more corruption and when the rule of law is weaker while these findings are consistent with the earlier results for transition economies in the larger country sample we find it is not necessarily the case that more regulation or higher taxes directly increases the size of the unofficial economy the problem appears to be not regulation or taxation per se but whether the state administrative system can operate without corruption a high level of regulatory discretion helps create the potential for corruption and drive firms into the unofficial economy

public prioritisation of energy affordability in the uk much research has focused on the so called energy trilemma i e three leading energy policy issues energy security affordability and climate change mitigation whilst substantial understanding exists of why people support climate friendly energy policies little is known about why they think affordability is important particularly what leads members of the public to identify this policy goal as more important than other objectives here we examine this question via a nationally representative survey of 2441 uk residents and demonstrate that concerns about personal costs explain a small amount of variation in the prioritisation of affordability as an energy policy goal a range of other factors also significantly contribute one such factor is beliefs about who is responsible for energy transitions these findings suggest policy actions to address affordability concerns should go beyond energy prices and include additional considerations such as distributive justice and equality

international credit supply shocks abstract house prices and exchange rates can potentially amplify the expansionary effect of capital inflows we first set up a model of collateralized borrowing in domestic and foreign currency with international financial intermediation in which a change in leverage of global intermediaries leads to an international credit supply increase in this environment we illustrate how house price increases and exchange rates appreciations contribute to fueling the boom by inflating the value of collateral we then document empirically in a panel var model for 50 advanced and emerging countries estimated with quarterly data from 1985 to 2012 that an increase in the leverage of us broker dealers also leads to an increase in cross border credit flows a house price and consumption boom a real exchange rate appreciation and a current account deterioration consistent with the transmission in the model finally we study the sensitivity of the consumption and asset price response to such a shock and show that country differences are associated with the level of the maximum loan to value ratio and the share of foreign currency denominated credit

how do budget deficits and economic growth affect reelection prospects evidence from a large panel of countries conventional wisdom is that good economic conditions and expansionary fiscal policy help incumbents get reelected but this has not been tested in a large cross section of countries we test these arguments in a sample of 74 countries over the period 1960 2003 we find no evidence that deficits help reelection in any group of countries developed and less developed new and old democracies countries with different government or electoral systems and countries with different levels of democracy in developed countries and in old democracies election year deficits actually reduce the probability that a leader is reelected with similar although smaller negative electoral effects of deficits in the earlier years of an incumbent s term in office higher growth rates of real gdp per capita raise the probability of reelection only in the less developed countries and in new democracies but voters are affected by growth over the leader s term in office rather than in the election year itself and apparently only by growth not attributed to global growth low inflation is rewarded by voters only in the developed countries the effects we find are not only statistically significant but also quite substantial quantitatively we also suggest how the absence of a positive electoral effect of deficits can be consistent with the political deficit cycle found in new democracies

identification of strategies to improve goat marketing in the lowlands of ethiopia a hedonic price analysis abstractthis article aims at identifying factors that determine market prices of goats and analyse potential mechanisms by which smallholder goat producers could maximize their benefits data on 35

commitment coordination failures and delayed reforms abstract economic reforms are often postponed even if they are clearly beneficial i argue that this may reflect a government s need to improve its reputation before it can enact a reform successfully i study a model in which the government has a commitment problem in setting taxes that pay for reform market expectations about future policy which determine investment become fundamental for the reform s success reform may be postponed as the government builds credibility with a period of low taxes depending on expectations better equilibria may exist the robustness of this explanation and its policy implications are discussed

measuring heterogeneous preferences for cattle traits among cattle keeping households in east africa this study employs mixed logit and latent class models to examine preferences for cattle traits with a focus on heterogeneity among cattle keepers using choice experiment data of 506 cattle keeping households in kenya and ethiopia the findings indicate the existence of preference heterogeneity based on cattle production systems highly valued cattle traits for the cropping systems include traction fitness and trypanotolerance while traits associated with herd increase are considered important in pastoral systems considering heterogeneity within population segments provides a framework for adapting breeding policy interventions to specific producer segments by integrating preferred traits in a breed improvement program

lending booms latin america and the world recent theories of crisis put lending booms at the root of financial collapses yet lending booms may be a natural consequence of economic development and fluctuations so are lending booms dangerous in this paper we investigate empirically this question using a broad sample of lending boom episodes over 40 years with a special eye for latin america our results indicate that 1 lending booms are often associated with i a domestic investment boom ii an increase in domestic interest rates iii a worsening of the current account iv a declines in reserves v a real appreciation vi a decline in output growth 2 typical lending booms do not increase substantially the vulnerability of the banking sector or the balance of payments comparing latin america and the rest of the world we find that latin america lending booms make the economy considerably more volatile and vulnerable to financial and balance of payment crisis

the global credit boom challenges for macroeconomics and policy the recent financial crisis has put the spotlight on the rapid rise in credit which preceded it in this paper we provide an empirical and theoretical analysis of the credit boom and the macroeconomic context in which it developed we find that the boom was unusually long and associated with neither particularly strong growth nor rising inflation in the economies in which it took place we show that this type of credit and financial cycle is hard to reconcile with existing economic theory and argue that while the global savings glut may account for the cycle s initial phase other factors such as the conduct of monetary policy and perceptions of declining macroeconomic risk were more important from the mid 2000s onwards we conclude by identifying some of the challenges now facing macroeconomics and policy

mexico s experiments with bank privatization and liberalization 1991 2003 during the 1990s mexico conducted two experiments with its banking system in the first experiment 1991 96 it privatized the banks this experiment took place with weak institutions to enforce contract rights it also took place without institutions that encourage prudent behavior by bankers the result was reckless behavior by banks and a collapse of the banking system in the second experiment 1997 2003 mexico reformed many of the institutions that promoted bank monitoring and it opened up the industry to foreign investment it was less successful however in reforming the institutions that promote the enforcement of contract rights the result was that bankers behaved prudently but prudent behavior in the context of weak contract rights implies that banks are reluctant to extend credit to firms and households

determining factors of curtailment and purchasing energy related behaviours changing people s behaviour in relation to energy consumption will be one of the most important challenges in the near future we analyzed the determinants behind individuals decisions to adopt curtailment behaviour or to purchase energy saving products using data from 213 university students we explored the influence of personal capabilities and moral norms along with trust in information on energy saving actions provided by different entities on two energy saving behaviours the results of the statistical model emphasise how personal norms and trust in information provided by private companies on the one hand and family and friends on the other strongly influence the adoption of energy saving actions and curtailment behaviours the paper reveals the pivotal role of private companies in developing the market demand for energy saving products by providing credible and scientifically based information on environmental performance the paper also contributes to strengthening the reliability of value belief norm theory and emphasizes the role of trust in information as a contextual factor that influences the adoption of a pro environmental behaviour

political credit cycles the case of the euro zone we study the mechanisms through which the adoption of the euro delayed rather than advanced economic reforms in the euro zone periphery and led to the deterioration of important institutions in these countries we show that the abandonment of the reform process and the institutional deterioration in turn not only reduced their growth prospects but also fed back into financial conditions prolonging the credit boom and delaying the response to the bubble when the speculative nature of the cycle was already evident we analyze empirically the interrelation between the financial boom and the reform process in greece spain ireland and portugal and by way of contrast in germany a country that did experience a reform process after the creation of the euro

the political economy of the ecuadorian financial crisis this paper takes the unusual step of exploring economic hypotheses through interviews with key economic agents it focuses on the causes of ecuador s 1999 banking collapse within an eclectic framework with minskian elements broad support is found for endogenous explanations of financial crises and little backing for explanations such as accidents or policy mistakes interviewees argued that after the stabilisation programme of 1992 agents became euphoric and accumulated debt to finance imprudent levels of expansion that incentives for moral hazard led to financial corruption and excessive risk taking and that weak regulation after

the international transmission of credit bubbles theory and policy we live in a new world economy characterized by nancial globalization and historically low interest rates this environment is conducive to countries experiencing credit bubbles that have large macroeconomic eects at home and are quickly propagated abroad in previous work we built on the theory of rational bubbles to develop a framework to think about the origins and domestic eects of these credit bubbles this paper extends that framework to include many countries and general preferences and uses it to study how nancial integration aects the properties of credit bubbles how the latter are transmitted across countries and the role of international policy coordination

do surges in international capital inflows influence the likelihood of banking crises this article asks whether capital inflows bonanzas increase the probability of banking crises and whether this occurs through a lending boom mechanism results indicate that bonanzas more than triple the odds of a crisis raising its probability to 14 from an unconditional probability of 4 this effect exists in the absence of a lending boom and is found in both net and gross inflows bonanzas this effect is driven by portfolio equity and debt flows while the effect of debt is channelled through excessive lending the effect of portfolio equity flows is present even in the absence of a lending boom

the estimation of demand parameters in hedonic price models this paper shows that the econometric problem of estimating hedonic demand parameters is not a standard identification problem caused by demand supply interaction as has been often assumed estimation procedures based on this assumption lead to biased results the hedonic estimation problem is instead caused by the endogeneity of both prices and quantities when households face a nonlinear budget constraint an instrumental variables solution to this problem is suggested using instruments that exogenously shift the budget constraint

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

a hedonic price model for rough rice bid acceptance markets several quality factors are important in valuing rough rice this paper first evaluates the ability of federal grades to explain these factors second the discounts associated with various quality factors are estimated finally the factors affecting acceptance of a bid are investigated the results indicate grades are useful but inadequate in explaining observed quality differentials the major quality factor in determining price was head yield stinkbug damage was the most important quality factor of those that producers could control the probability of acceptance increased with higher than expected bids smaller lot sizes more bidders and as the marketing season progressed

financial development financial fragility and growth the authors study the apparent contradiction between two strands of the literature on the effects of financial intermediation on economic activity on the one hand the empirical growth literature finds a positive effect of financial depth as measured by for instance private domestic credit and liquid liabilities for example levine loayza and beck 2000 on the other hand the banking and currency crisis literature finds that monetary aggregates such as domestic credit are among the best predictors of crises and their related economic downturns for example kaminski and reinhart 1999 the authors account for these contrasting effects based on the distinction between the short and long run impacts of financial intermediation working with a panel of cross country and time series observations they estimate an encompassing model of short and long run effects using the pooled mean group estimator developed by pesaran shin and smith 1999 their conclusion from this analysis is that a positive long run relationship between financial intermediation and output growth coexists with a mostly negative short run relationship the authors further develop an explanation for these contrasting effects by relating them to recent theoretical models by linking the estimated short run effects to measures of financial fragility namely banking crises and financial volatility and by jointly analyzing the effects of financial depth and fragility in classic panel growth regressions

small ruminant marketing in southwest nigeria abstract this paper describes the structure of the small ruminant trade in southwest nigeria analyses the factors determining the price of animals and examines the relationship of prices between markets animals imported from the north dominate the sheep and goat trades and supply and prices are highly seasonal however multiple regression shows animal prices to be largely predictable in terms of the characteristics of the animal breed sex and live weight and the market in which it is sold location and month of sale prices are relatively closely correlated between markets over time and price relationships between markets reflect the respective structures of the trade in northern and southern animals price margins between markets reflect the level of traders commission and storage costs in addition to the direct costs of transport the study concludes that there is no evidence for market inefficiency or segregation and that there is considerable market potential for increased local production of sheep and goats in policy terms the market s efficiency implies that government involvement beyond its present limited facilitative role would not be justified

heteroscedastic hedonic price model for cattle in the rural markets of central ethiopia this study employs a heteroscedastic hedonic price model to examine the factors that influence cattle prices in the rural markets of central ethiopia the empirical results show that season market location class of cattle body size and age are very important determinants of the cattle price the relative weight of the phenotypic characteristics of the animals is among the highest of all the factors considered these preferences at the farmers and farmer traders levels are the ones that matter most in shaping the diversity of animals kept at farm level and the diversity of cattle genetic resources is quite essential for generating or identifying the best suited breeds of cattle given the livelihood objectives of the target community

mexico s balance of payments crisis a chronicle of a death foretold this paper claims that the roots of mexico s balance of payments crisis are found in the prevailing high degree of capital mobility and financial globalization under these circumstances shifts in foreign capital flows and anticipation of a banking system bailout may produce large imbalances between stocks of financial assets and foreign reserves threatening the sustainability of currency pegs econometric analysis suggests that half of mexico s reserve losses could be accounted for by these phenomena large financial imbalances are also fertile ground for self fulfilling prophesy crises which lead devaluations to produce deep recessions these difficulties can be partly remedied by appropriate policies

when micro prudence increases macro risk the destabilizing effects of financial innovation leverage and diversification by exploiting basic common practice accounting and risk management rules we propose a simple analytical dynamical model to investigate the effects of microprudential changes on macroprudential outcomes specifically we study the consequence of the introduction of a financial innovation that allows reducing the cost of portfolio diversification in a financial system populated by financial institutions having capital requirements in the form of value at risk var constraint and following standard mark to market and risk management rules we provide a full analytical quantification of the multivariate feedback effects between investment prices and bank behavior induced by portfolio rebalancing in presence of asset illiquidity and show how changes in the constraints of the bank portfolio optimization endogenously drive the dynamics of the balance sheet aggregate of financial institutions and thereby the availability of bank liquidity to the economic system and systemic risk the model shows that when fin

consumer preferences for fresh food items with multiple quality attributes evidence from an experimental auction of pork chops this study illustrates an application of experimental auction methods using both experimental economics and experimental design to evaluate consumer perceptions and willingness to pay wtp for fresh pork chops we test and reject hypotheses that a market prices and consumers wtp are unaffected by the level of attributes embodied in the pork chops b appearance based on photographs or actual product and actual taste are equally good sources of consumer information and c consumers are consistent in their preferences for fresh pork attributes a major conclusion is that predicting consumer demand for fresh pork or any fresh food based on appearance without tasting is unproductive

on the choice of funtional form for hedonic price functions this study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function in simulations consumers with known utility functions bid for houses with given attributes various forms of the hedonic function are estimated using equilibrium housing prices errors in estimating marginal attribute prices are calculated by comparing each consumer s equilibrium marginal bid vector with the gradient of the hedonic function when all attributes are observed linear and quadratic box cox forms produce lowest mean percentage errors however when some attributes are unobserved or are replaced by proxies linear and linear box cox functions perform best copyright 1988 by mit press

financial crises and balance of payments crises a simple model of the southern cone experience abstract this paper starts from a simple model of the domestic banking sector and develops the potentially destabilizing macroeconomic consequences of its role in intermediating foreign capital inflows both financial and balance of payments crises may result reminiscent of the southern cone experience

a participatory approach to sustainable energy strategy development in a carbon intensive jurisdiction the case of nova scotia the need for governments to reduce the exposure of energy consumers to future increases in fossil fuel prices places urgent pressure on policy makers to deliver fundamental transformations in energy strategies particularly in jurisdictions with high dependency on fossil fuel sources dorian et al 2006 this transformation is unlikely without a high level of stakeholder engagement in the policy development process this paper describes two policy development processes recently undertaken in nova scotia in which the inclusion of stakeholder views was central to the approach the first delivered a new institutional framework for electricity energy efficiency involving the inception of an independent performance based administrator the second required the delivery of a strategy to significantly increase renewable energy generation in the province it involved recommendations for changes in institutional arrangements financial incentives and technological options this process was followed by new commitments to renewable energy developments new infrastructure for the importation of hydro electricity and the announcement of fits for ocean energy in both cases recommendations were made by an independent academic institution and the government responded directly to a majority of recommendations the paper concludes with a discussion of lessons learned and the implications for future energy policy making in carbon intensive jurisdictions

capital flows and destabilizing policy in latin america motivated by the excessive macroeconomic volatility experienced in latin america we examine the possible contribution of monetary and fiscal policies to this outcome in contrast with previous literature we consider the possible simultaneity between policy and gdp growth by using gmm var econometric techniques additionally we explore the direct impact international capital inflows have on these policies our evidence suggests that for the group of countries we consider most practice destabilizing fiscal and monetary policy and capital inflow consistently influences policy in a pro cyclical direction

farmers preferences for crop variety traits lessons for on farm conservation and technology adoption although in situ conservation is increasingly considered an efficient way of conserving plant genetic resources little is known about the incentives and constraints that govern conservation decisions among small farm holders in developing countries using a choice experiment approach we investigated ethiopian farmers crop variety preferences estimated the mean willingness to pay for each crop variety attribute and identified household specific and institutional factors that governed the preferences we found that environmental adaptability and yield stability are important attributes for farmers choice of crop varieties farmers are willing to forego some extra income or yield to obtain a more stable and environmentally adaptable crop variety among other things household resource endowments particularly land holdings and livestock ownership years of farming experience and contact with extension services are the major factors causing household heterogeneity of crop variety preferences based on our experimental results we derived important policy implications for on farm conservation breeding priority setting and improved variety adoption in ethiopia c 2010 elsevier b v all rights reserved less

perceptions versus objective measures of environmental quality in combined revealed and stated preference models of environmental valuation abstract this study examines perceptions and objective attribute measures in discrete choice models of recreation site choice behavior these forms of attribute measurement are examined in individual and combined revealed preference stated preference models our results suggest that the model based on perceptions slightly outperforms the models based on objective attribute measures however issues such as the definition of the choice set and the measurement of welfare present significant challenges when using perceptions data

good bye financial repression hello financial crash some unintended consequences of financial liberalization in latin america are analyzed in this paper intrinsic imperfectious in financial markets and the policy dilemmas they pose are reviewed first the stylized facts of southern cone experiments in financial liberization are then presented alternative ways of organlzing domestic capital markets under latin american conditions are discussed and an eclectic reform mongering program is proposed

extremal analysis of currency crises in taiwan we employ extreme value theory to identify currency crises in taiwan the new approach is able to identify severe currency crises and at the same time avoid the crisis misclassification problem of markov switching models signal accounting indicates that currency crises in taiwan are preceded by rapid expansion of domestic credit and other monetary aggregates implying that financial excesses stressed by the third generation crisis model are the main causes of these currency crises

privatization political risk and stock market development in emerging economies this paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk we argue that a sustained privatization program represents a major political test that gradually resolves uncertainty over political commitment to a market oriented policy as well as to regulatory and private property rights we present evidence suggesting that progress in privatization is indeed correlated with improvements in perceived political risk our analysis further shows that changes in political risk in general tend to have a strong effect on local stock market development and excess returns in emerging economies we conclude that the resolution of political risk resulting from successful privatization has been an important source for the rapid growth of stock markets in emerging economies

valuing indigenous cattle breeds in kenya an empirical comparison of stated and revealed preference value estimates abstract in this study we compare revealed and stated preference approaches to value traits of cattle in kenya the premise is that much can be learnt about non market values of indigenous animal genetic resources angr from the use of multi attribute stated preference methods if these compare well with revealed preference results the objective is to investigate the performance of choice experiments ces in maasai cattle trading by conducting an external test of preference consistency we compare value estimates for cattle attributes from ces data with those from hedonic analysis of actual transactions by the same population of traders in the same markets and over the same period if ces perform well they can be used to investigate values of those genetically determined livestock traits currently not prominent in pastoralists populations but desirable candidates for breeding or conservation programmes e g disease resistance the results indicate that ce estimates pass the external test and appear to be adequately precise in estimating values for cattle traits that are relevant in market transactions for maasai traders accounting for taste and variance heterogeneity does not change this conclusion ces may therefore be a promising tool for valuing phenotypic traits expressed by indigenous angr

good booms bad booms credit booms usually precede financial crises however some credit booms end in a crisis bad booms and others do not good booms we document that while all booms start with an increase of total factor productivity tfp and labor productivity lp such growth falls much faster subsequently for bad booms we then develop a simple framework to explain this firms finance investment opportunities with short term collateralized debt if agents do not produce information about the collateral quality a credit boom develops accommodatingfirms with lower quality projects and increasing the incentives of lenders to acquire information about the collateral eventually triggering a crisis when the average quality of investment opportunities also grows the credit boom may not end in a crisis because the gradual adoption of low quality projects is not strong enough to induce information about collateral finally we also test the main predictions of the model

ride the wild surf an investigation of the drivers of surges in capital inflows over the past 15 years gross inflows to industrial and developing countries have enjoyed a wild ride after reaching record highs in the run up to the global financial crisis they collapsed dramatically in 2008 09 as signs of global recovery reappeared capital inflows resumed although at different speeds the recovery in flows was faster and sharper in developing countries this paper aims at understanding the domestic and external drivers of these surges in gross inflows using quarterly data for 67 countries from 1975 to 2010 it finds that domestic and external factors have significant explanatory power in driving surges of inflows this finding holds for the sample of industrial countries whereas domestic factors play a significantly larger role in explaining surges to developing countries zooming into the findings shows that a financial booms tend to attract massive capital inflows b surges to either industrial or developing countries are driven by regional contagion and c strong growth and natural resource abundance are keys to attract inflows of foreign capital into developing countries

on the contribution of external cost calculations to energy system governance the case of a potential large scale nuclear accident abstract the contribution of nuclear power to a sustainable energy future is a contested issue this paper presents a critical review of an attempt to objectify this debate through the calculation of the external costs of a potential large scale nuclear accident in the externe project a careful dissection of the externe approach resulted in a list of 30 calculation steps and assumptions from which the 6 most contentious ones were selected through a stakeholder internet survey the policy robustness and relevance of these key assumptions were then assessed in a workshop using the concept of a pedigree of knowledge overall the workshop outcomes revealed the stakeholder and expert panel s scepticism about the assumptions made generally these were considered not very plausible subjected to disagreement and to a large extent inspired by contextual factors such criticism indicates a limited validity and useability of the calculated nuclear accident externality as a trustworthy sustainability indicator furthermore it is our contention that the externe project could benefit greatly in terms of gaining public trust from employing highly visible procedures of extended peer review such as the pedigree assessment applied to our specific case of the external costs of a potential large scale nuclear accident

capital inflow surges in emerging economies how worried should latin america and the caribbean be in the years leading up to the global economic crisis latin america and the caribbean received large capital inflows nonetheless the region survived the albeit short lived dramatic events of 2007 09 reasonably well with no financial crisis in any of the larger economies after the crisis capital inflows rose again in 2010 gross inflows to seven latin american countries argentina brazil chile colombia mexico peru and venezuela amounted to more than 6 percent of gross domestic product gdp and net inflows exceeded 3 percent of gdp more recently following the may 2013 speech of then chairman of the u s federal reserve ben bernanke there has been concern regarding the potential effects of tapering asset purchases by the u s federal reserve system and rising interest rates possibly spelling the end of large capital inflows to the latin american and caribbean region the literature on capital inflows suggests that while these flows represent an opportunity to spur investment and growth they may also increase vulnerability to financial crises macroeconomic instability and ultimately recession a relevant question then is whether the region can declare victory in being able to manage large capital inflows successfully or whether risks remain that justify strong measures our starting point is that the region has enjoyed strong surges in capital inflows we therefore decided to condition the analysis on surges occurring we do not seek to explain the reasons for such a surge one justification for this decision is that capital flows appear to be driven as much if not more by push rather than pull factors more specifically we seek to understand what determines whether such surges end in either a banking crisis or a recession while there is a substantial literature on the determinants of capital inflows their potential impacts have received much less attention the contribution of this paper is to analyze when inflow surges may end in severe economic problems including financial or macroeconomic instability rather than to identify the determinants of those surges we must first tackle the question of how to define a capital inflow surge we are helped in this regard by a small but growing literature however the current definitions of inflow surges in the literature may be injudicious we propose a new definition which considers the total size of the inflow episode across countries we also employ a more traditional definition based on yearby year inflows relative to a country specific threshold we contrast relevant statistics on the identified episodes using these two definitions and compare our episodes with others found in the literature we also consider whether the analysis should be conducted using gross or net inflows we take the view that employing net flows may discard useful information and that gross flows are relevant where financial instability is a potential concern even if net flows are zero a domestic financial system may intermediate large gross inflows when domestic residents purchase assets abroad we choose to focus on gross inflows but we include gross outflows as a potential explanatory variable so as not to lose information 1the empirical analysis in this paper develops a set of parsimonious models that discriminate reasonably well between the different economic outcomes we then analyze the case of a typical country from the region with a recent capital inflow surge providing a set of simulations to illustrate the economic magnitude of our results we simulate the changes in the estimated probabilities of negative outcomes given changes in certain critical variables we suggest that depending on the country inflow characteristics different policy measures may then be justified however a caveat is that emerging economies in general and latin america and the caribbean in particular have been experimenting with new policy measures and we are not able to evaluate their potential effectiveness in this paper

institutional causes macroeconomic symptoms volatility crises and growth countries that have pursued distortionary macroeconomic policies including high inflation large budget deficits and misaligned exchange rates appear to have suffered more macroeconomic volatility and also grown more slowly during the postwar period does this reflect the causal effect of these macroeconomic policies on economic outcomes one reason to suspect that the answer may be no is that countries pursuing poor macroeconomic policies also have weak institutions including political institutions that do not constrain politicians and political elites ineffective enforcement of property rights for investors widespread corruption and a high degree of political instability this paper documents that countries that inherited more extractive institutions from their colonial past were more likely to experience high volatility and economic crises during the postwar period more specifically societies where european colonists faced high mortality rates more than 100 years ago are much more volatile and prone to crises based on our previous work we interpret this relationship as due to the causal effect of institutions on economic outcomes europeans did not settle and were more likely to set up extractive institutions in areas where they faced high mortality once we control for the effect of institutions macroeconomic policies appear to have only a minor impact on volatility and crises this suggests that distortionary macroeconomic policies are more likely to be symptoms of underlying institutional problems rather than the main causes of economic

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

trust and the transformation of energy systems the author looks at diverse concepts and roles of trust in the challenge of decarbonising energy systems drawing on 25 years of personal experience in the fields of energy and environmental policy research the paper focuses on three issues public trust in science institutional trust in making technology choices and the idea that high trust societies are more sustainable than those exhibiting low trust while trust is a key concept in understanding the public acceptability of technology choices it is only one of a suite of interrelated concepts that must be addressed which also includes liability consent and fairness furthermore rational distrust among competing institutional world views may be critical in understanding the role of social capital in socioeconomic and technological development thus the concept of trust has become a portmanteau carrying a diverse range of ideas and conditions for sustainable energy systems the paper concludes with three emphases for decision makers first the issue is the energy system not particular generating technologies second the energy system must be recognized to be as much a social system as it is a technical one third the system requires incorporation of the minimum level of diversity of engineering technologies and social actors to be sustainable

financial development and the instability of open economies this paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies our basic model is a dynamic open economy model with a tradeable good produced with capital and a country specific factor we also assume that firms face credit constraints with the constraint being tighter at a lower level of financial development a basic implication of this model is that economies at an intermediate level of financial development are more unstable than either very developed or very underdeveloped economies this is true both in the sense that temporary shocks have large and persistent effects and also in the sense that these economies can exhibit cycles thus countries that are going through a phase of financial development may become more unstable in the short run similarly full capital account liberalization may destabilize the economy in economies at an intermediate level of financial development phases of growth with capital inflows are followed by collapse with capital outflows on the other hand foreign direct investment does not destabilize

are windfalls a curse abstract a puzzling feature of temporary terms of trade booms is that some countries have responded to such windfalls by running current account deficits furthermore those countries that ran current account deficits failed to attain greater post boom growth rates indicating the deficits were consumed or invested in low quality projects the point we make is that the structure of the fiscal process is critical in determining outcomes if fiscal control is unitary then the consumption smoothing effect is operative and representative agent models of the current account have predictive power however if control is divided among several fiscal claimants a voracity effect appears which counteracts the consumption smoothing effect leading to a deterioration of the current account in response to a positive temporary shock we model the interaction among fiscal claimants as a dynamic game and show that in equilibrium aggregate appropriation increases more than the windfall itself this results in a deterioration of the current account we also show that all the windfall is dissipated with the country experiencing no increase in welfare 1998 elsevier science b v

currency crises are they all the same abstract the plethora of currency crises around the world has fueled many theories on the causes of speculative attacks the first generation models focus on fiscal problems while the second generation models emphasize countercyclical policies and self fulfilling crises in the 1990s models pinpoint to financial excesses with the crisis of argentina in 2001 models of sovereign default have become popular again while the theoretical literature has emphasized variety the empirical literature has supported the one size fits all models this paper contributes to the empirical literature by assessing whether the crises of the last 30 years are of different varieties

barriers to investment in polarized societies i present a tractable dynamic model of political economy where disagreements about the composition of public spending result in implementation of short sighted policies the relative price of investment to consumption is excessively large in equilibrium due to over taxation investment rates are too low which slows down growth along the transition in the long run this results in output consumption and welfare being inefficiently low the larger is the degree of polarization the greater is the inefficiency political stability mitigates the effects of polarization by making the incumbent internalize the dynamic inefficiencies introduced by the choice of growth retarding policies

political capital mexican financial policy under salinas market reform is advocated in developing countries to improve economic efficiency and prevent privileged groups from obtaining rents from the policy making process yet this prescription fails to address the complex political process that governments are likely to confront when moving toward the market this study shows how political considerations during president salinas s administration distorted economic reform in mexico during the 1990s mexican finance policy contradicted the government s declared neoliberal principles while the banks were reprivatized and deregulated they were also given a high degree of protection from competition enabling the new owners to charge excessive interest rates in addition the government artificially inflated the value of the currency through exchange rate intervention these contradictory policies are best understood as a coherent political response to the electoral vulnerability of the ruling party pri at the end of the 1980s when viable political opposition threatened the pri s ability to maintain power it responded by using financial policies to distribute economic benefits to social groups particularly business the middle class and the poor whose support was critical for electoral victory

price expectations of sheep and goats by producers and intermediaries in quetta market pakistan abstract analysis of producers and intermediaries livestock price expectations was used to describe the market in quetta the largest livestock market in the highlands of balochistan province pakistan and to identify factors that determine price expectations of small ruminants a total of 4800 expected prices for sheep and goats were collected from producers and market intermediaries at monthly intervals between january 1991 and december 1992 in addition to the expected price of the animal liveweight species sex breed body condition fatness calendar day and month were recorded and whether data were collected on a meat or meatless day monthly rainfall data were also collected models of goat and sheep price expectations were built to compare the similarity of the behaviour of producers and intermediaries results indicated that producers and intermediaries expected high prices from november to january and during religious holidays they expected premiums and discounts related to animals attributes liveweight and seasonality had the strongest effect on prices rainfall in the current and previous month was positively related to seller s expected prices suggesting that livestock are retained to take advantage of favourable grazing conditions the models of price expectations showed that producers adjusted expected goat prices p 0 10 for seasonality liveweight body condition age sex and breed while they adjusted sheep prices for seasonality and liveweight only high pay offs could be expected if extension efforts focused on factors that determine sheep meat quality however the retail ceiling price of meat and the lack of grading are a disincentive to work in this direction seasonality of supply and demand is important in determining prices and this study provides baseline information for market scheduling however scheduling of sales of transhumant pastoralists may be difficult to achieve further investigation is justified to understand the gap in marketing knowledge between producers who sell in the villages and those who sell in quetta

revealed preference analysis of characteristics models characteristics models have been found to be useful in many areas of economics however their empirical implementation tends to rely heavily on functional form assumptions in this paper we develop a revealed preference approach to characteristics models we derive the necessary and su cient empirical conditions under which data on the market behaviour of heterogeneous price taking consumers are nonparametrically consistent with the consumer characteristics model where these conditions hold we show how information may be recovered on individual consumer s marginal valuations of product attributes in some cases marginal valuations are point identi ed and in other cases we can only recover bounds where the conditions fail we highlight the role which the introduction of unobserved product attributes can play in rationalising the data we implement these ideas using consumer panel data on the danish milk market

the terms of trade the real exchange rate and economic fluctuations this paper examines the relationship between terms of trade and business cycles using a three sector intertemporal equilibrium model and a large multicountry database results show that terms of trade shocks account for nearly one half of actual gdp variability the model explains weak correlations between net exports and terms of trade the harberger laursen and metzler effect and produces large and weakly correlated deviations from purchasing power parity and real interest rate parity terms of trade shocks cause real appreciations and positive interest differentials although productivity shocks have opposite effects the puzzle that welfare gains of international asset trading are negligible is left unresolved copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effect of bank bail outs in the eu abstract the financial crisis renewed the debate on the bail out of financial institutions questioning the effectiveness of such an intervention in restoring normal economic conditions this paper analyzes the effect on the real economy of state financial support to distressed banks using a panel approach that covers all countries in the eu throughout the financial crisis results show that state financial support was able to enhance economic conditions by restoring trust in financial markets state support boosted the ongoing substitution between securities and bank lending as the main financing channel of non financial firms

political booms financial crises political booms measured by the rise in governments popularity predict financial crises above and beyond better known early warning indicators such as credit booms this predictive power howev

who wants a good reputation we examine a market in which long lived firms face a short term incentive to exert low effort but could earn higher profits if it were possible to commit to high effort there are two types of firms inept firms who can only exert low effort and competent firms who have a choice between high and low effort there is occasional exit and competent and inept potential entrants compete for the right to inherit the departing firm s reputation consumers receive noisy signals of effort choice and so competent firms choose high effort in an attempt to distinguish themselves from inept firms a competent firm is most likely to enter the market by purchasing an average reputation in the hopes of building it into a good reputation than either a very low reputation or a very high reputation inept firms in contrast find it more profitable to either buy high reputations and deplete them or buy low reputations

a theory of political and economic cycles abstract we develop a theoretical framework in which political and economic cycles are jointly determined these cycles are driven by three political economy frictions policymakers are non benevolent they cannot commit to policies and they have private information about the tightness of the government budget and rents our first main result is that in the most favorable equilibrium to the households distortions to production emerge and never disappear even in the long run this result is driven by the interaction of limited commitment and private information on the side of the policymaker since in the absence of either friction there are no long run distortions to production our second result is that if the variance of private information is sufficiently large there is equilibrium turnover in the long run so that political cycles never disappear finally our model produces a long run distribution of taxes distortions and turnover where these all respond persistently to temporary economic shocks

the collapse of the mexican peso what have we learned the collapse of the mexican peso what have we learned in the first quarter of 1995 mexico found itself in the grip of an intense financial panic foreign investors fled the country despite very high interest rates an undervalued currency and financial indicators that pointed to long term solvency the fundamental conditions of the mexican economy cannot account for the extent of the crisis the crisis was not the result of irresponsible fiscal behaviour the crisis was due to unexpected shocks that occurred in 1994 the inadequate policy response to those shocks the increased vulnerability to panic and finally panic itself in the aftermath of the march assassination the exchange rate experienced a nominal devaluation of around 10 and interest rates increased by 7 percentage points however capital outflows continued the policy response was to maintain the exchange rate rule and to prevent further increases in interest rates interest rates were held down by expanding domestic credit and by converting short term peso denominated government liabilities cetes falling due into dollar denominated bonds tesobonos a fall in international reserves and an increase in short term dollar denominated debt resulted the government simply ended up illiquid and therefore financially vulnerable illiquidity exposed mexico to a self fulfilling panic jeffrey sachs aaron tornell and andres velasco

exchange market mayhem the antecedents and aftermath of speculative attacks exchange market mayhem the antecedents and aftermath of speculative attacks this paper evaluates the causes and consequences of episodes of turbulence in foreign exchange markets using data from 1959 through 1993 for twenty oecd countries we consider the antecedents and aftermath of devaluations and revaluations flotations fixings and speculative attacks which may not be successful we find that realignments of fixed exchange rates are alike devaluations are preceded by political instability budget and current account deficits and fast growth of money and prices revaluations are mirror images of devaluations speculative attacks resemble devaluations but money growth and inflation are more endemic and there is no last minute attempt to tighten monetary policy in contrast few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables transitions between exchange rate regimes are largely idiosyncratic and are neither consistently provoked ex ante by systematic imbalances nor typically justified ex post by subsequent changes in policy we conclude that there are no clear early warning signals of many speculative attacks and no easy solutions for policy makers barry eichengreen andrew k rose and charles wyplosz

credit booms monetary integration and the new neoclassical synthesis abstract credit to the private sector has risen rapidly in many new central and eastern european eu member states nms in recent years the lending boom has recently been particularly strong in the segment of loans to households primarily mortgage based housing loans and in those countries that operate currency boards or other forms of hard pegs the main aim of this paper is to propose a conceptual framework to analyze the observed developments with a view to exploring some policy implications at a stage in which these countries are preparing for their prospective integration with the euro area to achieve this we first use a stylized new neoclassical synthesis nns framework which has recently been advanced by goodfriend goodfriend m 2002 monetary policy in the new neoclassical synthesis a primer federal reserve bank of richmond july and goodfriend and king goodfriend m king r 2001 the case for price stability nber working paper 8423 we then discuss the implications of the nns model for credit dynamics and ensuing monetary policy challenges specifically we emphasize consumption smoothing as an important channel of the observed credit expansion and we show how it is related to and how it affects the monetary policy making in ms in doing so we place our discussion in the context of the monetary integration process in general and the nominal convergence process in particular

hedonic estimation of quality factors affecting the farm retail margin a model of the farm retail marketing margin is tested using producer and retail prices of a perishable product in which time during season and quality characteristics are variable empirical analysis verifies that the marketing margin of california fresh peaches decreases during the season and increases with improved quality results identify potential producer gains from improving product quality early in the season and from price signals compensating producers for quality characteristics other than weight

buyer preferences for sheep and goats in southern nigeria a hedonic price analysis abstract a survey of two rural markets in southwest nigeria over 14 months showed that supplies sales and prices of sheep and goats varied widely during the period with a sharp peak during the muslim festival of eid el kabir and a smaller peak during the christmas new year period local west african dwarf wad sheep and goats and northern y ankasa sheep and red sokoto goats were traded in the markets and animals were purchased for rearing trading ceremonies butchering catering sacrifice and festivals there were significant differences between species breeds purchased for various purposes a hedonic price model was fitted to determine factors influencing price after adjustments were made for age weight sex time of transaction and market wad sheep commanded higher prices than wad goats and red sokoto goats for all purposes except for butchering catering red sokoto goats commanded similar or lower prices than wad goats depending on the purpose for purchase and y ankasa sheep principally purchased for the eid el kabir festival commanded marginally higher prices than wad sheep the market share of wad sheep is currently small and is under competition from northern sheep and goats so increased production of wad sheep in the south will benefit both producers and consumers in the area in general the results indicate that buyers have preferences for specific breeds and species for specific purposes so producers and sellers may benefit by targeting specific buyer categories and times of the year

what can we learn about commodity and credit cycles evidence from african commodity exporting countries abstract this study analyzes the relationship between commodity prices and credit to the private sector in commodity exporting developing countries particularly three nations in sub saharan africa in this regard we extend the findings of non empirical studies dealing with this issue for the case of african countries and complement the literature on the methodological side by investigating this relationship using wavelet analysis this frequency approach is appropriate as it takes into account investor heterogeneity and the time variant characteristic of the studied relationship further it explains the lead lag relationship between the studied series first we observe that credit and commodities are strongly related over long timescales suggesting that the credit market reacts strongly to long term change in commodity markets and thus tends to be sensitive to persistent commodity shocks second for medium and short timescales the interaction is high and significant only during periods of turmoil in terms of the lead lag relationship our results also show that the commodity market causes fluctuations in the credit market

inequality and institutions abstract this paper presents theory and evidence on the relationship between inequality and institutional quality we exhibit a model in which the two may dynamically reinforce each other and set to test this relationship with a broad array of institutional measures the double causality between institutional strength and a more equal distribution of income is empirically established using dynamic panel and linear feedback analysis

why doesn t capital flow from rich to poor countries an empirical investigation we examine the empirical role of difierent explanations for the lack of ows of capital from rich to poor countries the lucas paradox the theoretical explanations include difierences in fundamentals across countries and capital market imperfections we show that during 1970i2000 low institutional quality is the leading explanation for example improving peru s institutional quality to australia s level implies a quadrupling of foreign investment recent studies emphasize the role of institutions for achieving higher levels of income but remain silent on the speciflc mechanisms our results indicate that foreign investment might be a channel through which institutions afiect long run development

credit booms and macrofinancial stability this paper explores several questions about credit booms and busts when do credit booms occur when do they end up in busts and when do they not what are the implications for different policies if curbing credit growth and or mitigating the associated risks is an objective we find that credit booms are often associated with financial reform and economic growth they also tend to be more frequent in fixed exchange rate regimes only one in three credit boom episodes are followed by a financial crisis these booms tend to be larger and last longer macroprudential tools have at times proven effective in containing booms and more often in limiting the consequences of busts due to the buffers they helped to build

what drives international financial flows politics institutions and other determinants abstract this paper uses a large panel of financial flow data from banks to assess how institutions affect international lending first employing a time varying composite institutional quality index in a fixed effects framework the paper shows that institutional improvements are followed by significant increases in international finance second cross sectional models also show a strong effect of initial levels of institutional quality on future bank lending third instrumental variable estimates further show that the historically predetermined component of institutional development is also a significant correlate of international bank inflows the results thus suggest that institutional underdeveloped can explain a significant part of lucas lucas robert e 1990 why doesn t capital flow from rich to poor countries american economic review papers and proceedings 80 2 92 96 1990 paradox of why doesn t capital flow from rich to poor countries the analysis also does a first step towards understanding which institutional features affect international banking