does exchange rate variability depress trade flows evidence from error correction models this paper examines the impact of exchange rate volatility on the trade flows of the g 7 countries in the context of a multivariate error correction model the error correction models do not show any sign of parameter instability the results indicate that the exchange rate volatility has a significant negative impact on the volume of exports in each of the g 7 countries assuming market participants are risk averse these results imply that exchange rate uncertainty causes them to reduce their activities change prices or shift sources of demand and supply in order to minimize their exposure to the effects of exchange rate volatility this in turn can change the distribution of output across many sectors in these countries it is quite possible that the surprisingly weak relationship between trade flows and exchange rate volatility reported in several previous studies are due to insufficient attention to the stochastic properties of the relevant time series copyright 1993 by mit press

intervention analysis of electoral tax cycle the case of japan this paper analyzed the impact of elections on tax policy in japan using an arima autoregressive integrated moving average intervention analysis from 1953 through 1992 we used discretionary tax revenues which means the changes in tax receipts attributable to changes in the tax code rather than automatic tax revenues due to business cycles in the economy

individual transferable quota markets under illegal fishing the use of individual transferable quotas in fisheries has been considered an opportunity to achieve a given total allowable catch with a maximum social benefit one of the assumptions used in obtaining that result is that the system is in perfect compliance the presence of violations and the need for enforcement of tradable property rights systems in fisheries has not received much attention in the literature the incidents of non compliance however may affect the performance of transferable property rights based fisheries in unexplored ways in this paper we adapt previous literature on enforcing emissions trading programs to analyze a positive model of fisherman behavior that operates under a perfectly competitive individual transferable quota system while recognizing the opportunities for violations of quota holdings given incomplete enforcement considering a poorly enforced individual transferable quota system we are able to obtain a number of implications for the current and future equilibrium of the quota market the time paths of the fishery and the proper design of a policy rule on total allowable catch tac

explaining presidential priorities the competing aspiration levels model of macrobudgetary decision making this article develops a new statistical model of trade offs among defense nondefense and fiscal policy concerns as they are reflected in the presidential budgetary process the competing aspiration levels model calm builds on crecine s 1971 great identity argument unlike most previous attempts to model presidential budgeting calm explicitly represents the interdependence of decisions about defense nondefense and totalfederal expenditures calm models this interdependence as the result of the interaction of minimal aspirations for defense and nondefense expenditures with a maximum acceptable level of expenditures from a fiscal policy standpoint statistical analyses of presidential budgets for the fiscal years from 1955 through 1980 provide strong support for the calm formulation substantively the results indicate that fiscal constraints on total expenditures have progressively weakened that the maximum acceptable expenditure level has generally exceeded the minimal expenditure aspiration level and that when a potential fiscal surplus has existed the nondefense sector has been more successful in capturing a share of this surplus than the defense sector in keeping with traditional incrementalist arguments the results indicate that previous year expenditure levels provide a relatively secure budgetary base for both the defense and nondefense sectors both sectors tend to receive their minimal aspiration levels plus a share of whatever fiscal surplus exists the analysis also indicates that the executive branch has not been as strong a direct force for budgetary growth as congress

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

has the european monetary system led to more exports evidence from four european union countries abstract we attempt to investigate whether the exchange rate mechanism erm period has coincided with an increase in intra eu exports we conclude that this has not been the case but it is likely that the elimination of nominal exchange rate variability arising from a single currency will boost intra european union trade

central bank transparency and cross border banking abstract we analyze the effect of central bank transparency on cross border bank activities based on a panel gravity model for cross border bank claims for 21 home and 47 destination countries from 1998 to 2010 we find strong empirical evidence that a rise in central bank transparency in the destination country on average increases cross border claims using interaction models we find that the positive effect of central bank transparency on cross border claims is only significant if the central bank is politically independent and operates in a stable economic environment central bank transparency and credibility are thus considered complements by banks investing abroad

taxation and political business cycles in eu economies this paper examines whether incumbent national governments of 11 member states of the european union manipulated the tax policy instruments at their disposal in order to create national political business cycles opportunistic or partisan the empirical evidence based on data concerning the 1965 to 1997 period does not support this hypothesis rather it appears that governments have pursued stabilization policies

the impact of monetary union on macroeconomic integration evidence from west africa data from 19 african nations is used to investigate the hypothesis that monetary union represented in this case by the cfa franc zone augments the extent of macroeconomic integration the paper covers two key dimensions of integration the volume of bilateral trade and the magnitude of cross country business cycle correlation restricting our attention to a part of the world in which for historical reasons monetary union membership is exogenous to economic characteristics we can test whether the large single currency effects claimed by a rose apply within a sample of less developed countries

elections keynes bureaucracy and class explaining u s budget deficits 1961 1978 the determination of u s federal budget deficits and surpluses during a period of keynesian fiscal activism is modeled in light of relevant social science literatures rational choice emphases upon electoral manipulation of the economy and keynesian stabilization marxian emphases upon monopolization andfiscal control of labor militancy organizational decision theory emphases upon budgeting inertia and a number of additional thrusts from other literatures are supported by time series regression analyses of 1961 1978 surpluses deficits the final model is statistically well behaved analysis of so called high employment measures of discretionary surpluses deficits supports all interpretations requiring discretionary policy making but an indication of automatic stabilization emerges as well a focus upon executive policy making roles is suggested as one means to further theoretical integration of explanations of state macroeconomic policy

the political policy cycle presidential effort vs presidential control after disentangling presidential budget proposals from budgetary changes attributable to fluctuations in the economy and to congressional action we find consistent evidence for a presidential macroeconomic policy cycle attuned to the elctoral cycle proposed budgets are more expansionary in election years than at other times the congress however also plays a significant role in determining fiscal outcomes its budgets are systematically related to those of the president and in general reinforce presidential efforts to respond to the electoral cycle

the regulatory choice of noncompliance in emissions trading programs this paper addresses the following question to achieve a fixed aggregate emissions target cost effectively should emissions trading programs be designed and implemented to achieve full compliance or does allowing a certain amount of noncompliance reduce the costs of reaching the emissions target the total costs of achieving the target consist of aggregate abatement costs monitoring costs and the expected costs of collecting penalties from noncompliant firms under common assumptions i show that allowing noncompliance is cost effective only if violations are enforced with an increasing marginal penalty however one can design a policy that induces full compliance with a constant marginal penalty that meets the aggregate emissions target with lower expected costs this last result does not depend on setting an arbitrarily high constant marginal penalty in fact the marginal penalty need not be higher than the equilibrium marginal penalty under the policy with the increasing marginal penalty and can actually be lower finally tying the marginal penalty directly to the permit price allows the policy objective to be achieved without any knowledge of firms abatement costs

exchange rate variation commodity price variation and the implications for international trade abstract a commonly cited disadvantage of floating exchange rates is that a fluctuating exchange rate reduces international trade when firm owners are risk averse risk averse firm owners are concerned with the variation in the real domestic currency price of the good they export or import this price variation depends on exchange rate variation but also on a good s foreign currency price variation domestic price level variation and the covariation between these three variables the empirical results presented here show that for many commodities floating exchange rates did not cause a significant increase in overall real domestic currency price variation

testing the satisficing version of the political business cycle 1905 1984 this paper develops a test of the satisficing version of the political business cycle previous tests have focused on maximizing models of political behavior and are not sufficiently general to test for satisficing behavior using annual u s data for the period 1905 to 1984 we find evidence supporting the satisficing version of the political business cycle model but we reject the maximizing version in accordance with the satisficing hypothesis we find that increasing inflation or unemployment and decreasing monetary base growth in the third year of a presidential term are followed typically by reversals during the election year

trade creation and diversion revisited accounting for model uncertainty and natural trading partner effects summary the effect of preferential trade agreements ptas on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical pta literature the existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the correct set of explanatory variables that ought to be included in the analysis to account for the model uncertainty that surrounds the validity of the competing pta theories we introduce bayesian model averaging bma to the pta literature statistical theory shows that bma successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error and by generating predictive distributions with optimal predictive performance once model uncertainty is addressed as part of the empirical strategy we find strong evidence of trade creation trade diversion and open bloc effects our results are robust to a range of alternative empirical specifications proposed by the recent pta literature copyright 2010 john wiley sons ltd

effects of exchange rate variations on bilateral trade with a vehicle currency evidence from china and singapore abstract using a testable gravity type bilateral trade model derived from an underlying demand and supply model this paper explores the effects of exchange rate variations on bilateral trade in an exchange rate regime with a vehicle currency the introduction of the vehicle currency allows us to figure out whether variations in the trade volume due to the fluctuation of the bilateral exchange rate are primarily due to changes in demand or in supply or both more specifically in this theoretical framework the appreciation of one country s currency against the vehicle currency is expected to promote its imports but the effect of revaluation of the country s currency against the vehicle currency on its exports is ambiguous moreover high volatility of the exchange rate of one country s currency against the vehicle currency is also expected to depress its import volume from the empirical point of view the decomposition of the bilateral exchange rate of two currencies into the bilateral rates of these two currencies against the vehicle currency provides a new alternative to avoid the econometric problem of potential reverse causality in assessing the effects through compiling a novel monthly bilateral trade dataset between china and singapore over 21 years or 252 months we empirically test the predictions of our model which get robust support from the results

a note on uncertainty and rent capture in an itq fishery abstract this note addresses the effect of uncertainty on the expected resource rent the short run quota equilibrium and the methods of rent capture in an individual transferable quota fishery with heterogeneous fishers it presents some new results on the effects of output price uncertainty on the quota demands the short run equilibrium and the possible choice of a method of rent capture

exchange rate effects on the volume and variability of trade flows abstract this paper investigates the effects of exchange rate uncertainty on the volume and variability of trade flows employing a signal extraction framework we show that the direction and magnitude of importers and exporters optimal trading activities depend upon the source of the uncertainty general microstructure shocks fundamental factors driving the exchange rate process or a noisy signal of policy innovations providing a rationale for the contradictory empirical evidence in the literature we also show that exchange rate uncertainty emanating from general microstructure shocks and the fundamental factors reduces the variability of trade flows while that related to a noisy signal of policy innovations increases variability

the effects of real exchange rate risk on international trade abstract by assuming real profit maximization and uncertain prices as well as exchange rates we conclude that it is uncertain percentage changes in the real exchange rate that are risky in international trade empirical estimation of fourteen bilateral trade flows among industrialized countries finds a significant negative effect on trade quantity from such risk in a number of these cases the expectation variable has a positive effect in a larger number of cases significant price effects from the expectation variable are fewer and from risk are negligible

influences on executive and congressional budgetary priorities 1955 1981 a reduced form equation system is used to analyze the influence of economic political and institutional influences on the budgetary priorities of the executive branch and congress during fiscal 1955 81 three related issues are considered the extent to which political and macroeconomic factors affect priorities the degree of interdependence among the components of the federal budget and between spending and revenues and differences between the executive branch and congress with respect to these issues both types of interdependence are present within both executive branch and congressional budgeting although this interdependence is stronger within the executive branch the influence of economic conditions on budgetary outcomes is strong but varies considerably across spending categories there is no evidence of apolitical business cycle political variables exert a modest influence on the budgetary outcomes examined differences between democratic and republican budgetary policies as well as differences in the budgetary priorities of different presidential administrations are small by comparison with the differences between executive and congressional policies

the effects of exchange rate volatility on agricultural trade i extend cho sheldon and mccorriston s 2002 analysis of the effect of exchange rate volatility on agricultural trade among the g 10 countries to a broad sample of developed and developing nations i replicate their original finding that exchange rate volatility has a large negative impact on agricultural trade between g 10 members after controlling for agricultural export subsidies which are correlated with exchange rate volatility i show that the original impact declines by half using the extended sample i find that the effect of exchange rate volatility is much larger for developing country exporters than for developed exporters copyright 2008 oxford university press

normative and social influences affecting compliance with fisheries regulations economic models of regulatory compliance in fisheries usually assume an instrumental determination of individual behavior in which the decision to comply or to violate depends primarily on the expected monetary costs and benefits policy implications tend as a result to focus only on deterrence that is increasing the expected monetary costs of violation more complete models of compliance behavior take into account factors such a social influence moral values and the perceived legitimacy of regulations and the regulatory authority the paper describes an investigation into the non monetary factors affecting compliance with output quota restrictions among fishermen in the united kingdom

the tradable permits approach to protecting the commons lessons for climate change tradable permit approaches for rationing access to the commons have been applied to many different types of resources in many different countries this essay reviews the experience with three main applications of tradable permit systems air pollution control water supply and fisheries management as well as some unique related programmes the purpose of the review is to draw together what we have learned about tradable permits in practice that might offer some useful insights for the implementation of the three tradable permit mechanisms that are part of the kyoto protocol copyright 2003 oxford university press

measuring and analysing the effects of short term volatility in real exchange rates this paper examines short term volatility in the real effective exchange rates of industrial countries and its impact on their imports it yields three conclusions first volatility has not diminished as markets have gained experience with floating exchange rates the trend appears to be in the opposite direction for some countries second exposure to short term volatility has differed among countries japan and sweden have experienced much more than most other industrial countries third volatility appears to depress the volume of international trade this third finding is consistent with results reported by cushman and by akhtar and hilton and challenges earlier findings by hooper and kohlhagen

political cycles and cyclical policies we test how government revenue and expenditure depend on ideology elections and economic activity we show how fiscal forecasts can be used to identify the determinants of government revenue and expenditure the approach is illustrated using a unique unpublished swedish data set of fiscal forecasts and forecasts of economic activity we find partisan effects but no election effects revenue and expenditure but also the fiscal surplus are lower with right wing governments fiscal policy has been countercyclical revenue varies positively with nominal earnings expenditure varies negatively with real gdp

self reporting and the design of policies for regulating stochastic pollution abstract existing environmental regulations frequently require firms to self report their compliance status to regulatory agencies using a principal agent framework i derive and compare incentive compatible regulatory policies with and without self reporting i find the firm needs to be audited less often when self reporting is required but punished more often the sign and magnitude of the gains from self reporting depend on the relative size of audit and sanction costs the accuracy of the regulator s monitoring technology and the desired level of abatement effort

bilateral trade flows the linder hypothesis and exchange risk bilateral trade flows are used to examine the linder hypothesis and the effect of exchange rate variability in a gra vity type trade model derived from an underlying demand and supply mo del a behavioral model is used to justify examining these issues joi ntly the model performs well empirically using a sample of seventeen countries for the period 1974 82 the authors find overwhelming supp ort for the linder hypothesis and this version of the gravity model moreover they find strong support for the hypothesis that increased exchange rate variability affects bilateral trade flows copyright 1987 by mit press

international financial volatility and commodity exports evidence from the thai agricultural sector using 1981 2006 data from the bank of thailand i estimate the effect of four measures of real exchange rate volatility on thai exports of five key agricultural commodities controlling for both the level of the real exchange rate and foreign incomes estimates of the effect of volatility on export volume are generally negative and often significant lending support to a range of theoretical models that predict such an effect no such relationship exists between lagged values of exchange rate volatility and agricultural production the range of results obtained using various measures of volatility suggests caution in comparing studies using different measures copyright 2010 oxford university press

the congress and fiscal policy although the common belief is that the congress has paid little attention to fiscal policy the same kinds of political economic models which have been used to explain presidential budgetary policy may be used equally well to explain congressional budgetary behavior the congress fiscal policy appears to be systematically sensitive to both economic and political factors changes in the unemployment rate have a major impact on congressional budgetary policy as for political factors the president s lead is followed most closely on revenue proposals and not at all on the expenditure side the electoral cycle in particular the off year congressional election year is also important inducing larger deficits and smaller increases in revenues

the cost effective choice of policy instruments to cap aggregate emissions with costly enforcement we study the cost effectiveness of inducing compliance in a program that caps aggregate emissions of a given pollutant from a set of heterogeneous firms based on emissions standards and the relative cost effectiveness of such a program with respect to an optimally designed program based on tradable discharge permits our analysis considers abatement monitoring and sanctioning costs as well as perfect and imperfect information on the part of the regulator with regard to the polluters abatement costs under perfect information we find that a the total cost effective design of a program based on standards is one in which the standards are firm specific and perfectly enforced and b the total cost of an optimally designed program based on standards is lower than the total cost of an optimally designed transferable emission permits system except under special conditions this is true when it is optimum to induce perfect compliance and when it is not under imperfect information nevertheless it is only by implementing a system of tradable permits and perfectly enforcing it with a constant marginal penalty tied to the price of the permits that the regulator can surmount the informational problem and at the same time minimize the total cost of the program with certainty

using taxes to deter illegal fishing in itq systems we study the effects of different tax schemes used in fisheries management in combination with an individual transferable quota system we focus on the effects of taxes on equilibrium quota prices and on violations under the assumption that enforcement to induce compliance is imperfect and costly the use of taxes is motivated by the regulator s need to recover costs for enforcement activities we propose the use of a tax on the price of the processed products based on its impact on violations and the information that is required to implement it we also show that this tax has a double pay off for enforcement because it reduces the demand for illegal fishing and increases revenue for enforcement activities without producing a deadweight loss in the quota market we present an application of our model to the case of the red shrimp fishery in chile in our simulation example a tax of 7 on the price of fish exports could sufficiently reduce harvest demand and generate enough funding to completely eliminate quota violations which in the absence of taxes can be more than 100 of the total allowable catch at the same time this tax could increase the equilibrium quota price by 19

non compliance and the quota price in an itq fishery this paper examines the effects of non compliance on quota demands and the equilibrium quota price in an itq fishery i show that whereas lower quota prices are implied unambiguously by expected penalties which are a function of the absolute violation size the expectation of penalties based upon relative violations of quota demands can under certain conditions produce higher quota prices than in a compliant quota market if there are both compliant and non compliant firms in the fishery the result would then be a shift in quota demand from compliant to non compliant firms rather than the reverse the findings are generally applicable to quota markets in other industries including pollution permit markets

to comply or not to comply pollution standard setting under costly monitoring and sanctioning in this paper we characterize optimal regulatory policies composed of a pollution standard a probability of inspection and a fine for non compliance in a context where both monitoring and sanctioning are socially costly and the penalty may include gravity and non gravity components at the regulator s discretion under given penalties the optimal policy entails compliance with the standard as long as a quite intuitive condition is met non compliant policies may include standards even below the pollution levels that minimize the sum of abatement costs and external damages interestingly the appropriate structure of the penalty under non compliance is highly progressive while the best possible shape of the fine under compliance is linear if the regulator is entitled to choose the structure of the fine linear penalties are socially preferred and the optimal policy induces compliance

a political economic model of u s bilateral trade a bstract interrelationships between economics and politics have long been recognized by scholars in the field of international relations this paper attempts to identify and quantify the factors aflecting bilateral trade flows between the united states and other countries by developing a gravity type model the model includes economic and political variables and is tested using data for sixty six u s trading partners results indicate that pure economic variables which reflect market forces are not the only factors affecting u s bilateral trade semi cconomic and international political factors are also important

international capital flows and agricultural exports interest in the relationship between international capital flows and exports revived recently following the international debt repayment problems of several developing countries and the decline in u s agricultural exports since 1980 this paper will consider the recent export decline as well as the more general relationship between lending and agricultural exports although particular agricultural exports have been important throughout its history the united states did not become a persistent agricultural exporter until 1960 council of economic advisers p 342 agricultural exports and the agricultural trade balance increased sharply in 1973 and again in 1979 80 see table 1 in each of these cases the price of oil increased and the dollar depreciated in real terms subsequently exports decreased constant 1967 dollars from 16 7 billion in 1980 to 9 0 billion in 1985 and the real agricultural trade balance declined from 9 7 billion to 2 8 billion during the same period the 1985 decline has returned exports to the pre1973 level

fixed exchange rates and trade abstract a classic argument for a fixed exchange rate is its promotion of trade empirical support for this however is mixed while one branch of research consistently shows a small negative effect of exchange rate volatility on trade another more recent branch presents evidence of a large positive impact of currency unions on trade this paper helps resolve this disconnect our results which use a new data based classification of fixed exchange rate regimes show a large significant effect of a fixed exchange rate on bilateral trade between a base country and a country that pegs to it these results suggest an economically relevant role for exchange rate regimes in trade determination since a significant amount of world trade is conducted between countries with fixed exchange rates

the effects of exchange rate variability on international trade a meta regression analysis the trade effects of exchange rate variability have been an issue in international economics for the past 30 years the contribution of this article is to apply meta regression analysis mra to the empirical literature on average exchange rate variability exerts a negative effect on international trade yet mra confirms the view that this result is highly conditional by identifying factors that help to explain why estimated trade effects vary from significantly negative to significantly positive mra evidence on the pronounced heterogeneity of the empirical findings may be instructive for policy first by establishing that average trade effects are not sufficiently robust to generalize across countries and second by suggesting the importance of hedging opportunities hence of financial development for trade promotion for the practice of mra we make a case for checking the robustness of results with respect to estimation technique model specification and sample

gravity models a reformulation and an application to discriminatory trade arrangements gravity models are used to estimate trade flows from 162 countries into 11 major importing countries for 1976 counting the ec as one the main theories underlying gravity models are reviewed and a new gravity model is derived from a linear expenditure system a major innovation of this model is that both tariffs and dummy variables for discriminatory arrangements are incorporated price variables are also explicitly included in the model the tariff and the dummy variables are found to be statistically significant and this indicates that previous gravity model studies which used dummies to estimate the trade benefits of preferential tariffs may not have accurately estimated the effects of the preferences the price variables generally are also found to be statistically significant which casts doubt on the homogeneous goods assumption underlying the purchasing power parity hypothesis some significant differences in the estimates were found when separate equations were regressed for the eec and the us