controls on capital inflows and the transmission of external shocks in this paper we attempt to analyse whether price based controls on capital inflows are successful in insulating economies against external shocks we present results from vector autoregressive var models which indicate that chile and colombia countries that adopted controls on capital inflows seem to have been relatively well insulated against certain types of external disturbances subsequently we use the autoregressive distributive lag ardl approach to co integration in order to isolate the effects of the capital controls on the pass through of external disturbances to domestic interest rates in those economies we conclude that there is evidence that the capital controls have allowed for greater policy autonomy

occupation and the political economy of trade job routineness offshorability and protectionist sentiment the recent backlash against globalization in many advanced economies raises questions about the source of this protectionist sentiment traditional accounts generally attribute the welfare consequences of trade to skill level or industry characteristics or instead emphasize the nonmaterial determinants of support for openness consequently we know little about how a major labor market characteristic occupation shapes both the distributional consequences of and preferences toward trade openness we propose and test a new theory of trade policy preferences based on occupation characteristics drawing from the tasks literature in economics we argue that occupation characteristics are a key determinant of how trade affects workers and thus individuals trade preferences our theory suggests that in advanced economies individuals in routine task intensive occupations will be negatively affected by trade and thus more protectionist this relationship will increase in the degree to which occupation job tasks can be provided from a distance i e offshorable we find support for our theory using data from the 2003 and 2013 international social survey programme in high income democracies our results suggest that the occupational characteristics of routineness and offshorability are important determinants of trade preferences offering additional understanding of the sources of protectionist sentiment even after controlling for labor market characteristics suggested by conventional wisdom

fragmentation and multinational production abstract this paper examines the consequences of falling transport costs for intermediate goods and shows how this leads to the spatial fragmentation of production as firms divide their production between countries they become either vertical multinationals if upstream activities are labour intensive or horizontal multinationals if downstream activities are labour intensive in the former case the volume of world trade increases and in the latter it falls fragmentation need not narrow international factor price differences which depend on the factor intensity of the activities that relocate

averting crisis assessing measures to manage financial integration in emerging economies the asian crisis provides heterodox economists with the opportunity to investigate counterfactually whether the financial policies they have proposed would have averted the crisis the paper argues that neo liberal financial integration introduces distinct risks to emerging economies currency flight fragility contagion and sovereignty risks the paper presents the financial policies endorsed by the heterodoxy transactions taxes trip wires and or speed bumps convertibility restrictions the chilean model and a publicly managed mutual fund the paper considers whether these policies mitigate risks and whether they could have prevented the asian crisis and the transmission thereof the paper concludes with policies to avert future crises copyright 2003 oxford university press

shadow pricing with suboptimal policy rules abstract this paper aims to clarify different views on the validity of the little mirrlees border price rule for project evaluation in a context where the government chooses its controls suboptimally in a systematic fashion the rule is shown to be valid quite generally for small public sector projects when the government s response restores market clearing in nontradeables and foreign exchange it can be invalid in contexts of a non market clearing or b private sector projects that generate profits distributed to households in the latter case special treatment of profit effects is required along the lines described by little and mirrlees 1974

input trade and the location of production stanley engerman has been a presence in the department of economics at the university of rochester for over 37 years he was an early and eminent participant in the cliometric revolution that swept throughout the economichistory profession in the 1960 s and 1970 s we doubt that anyone could have anticipated the gathering storm that greeted the publication of time on the cross co authored with robert fogel in 1974 since that time stan has become the world s leading authority on slavery in the americas and the caribbean as well as an important contributor to a set of issues ranging from the 19th century american iron industry to the economics of british imperialism his own human capital as extensive as we know it to be is complemented by capital of the physical variety an enormous library of research material spilling over into bookshelves and floors in several offices in rochester and attracting a yearly stream of itinerant scholars anxious to pick his books as well as his brains in this short note we intend to honor stan by applying the tools of international trade theory to illustrate several episodes in the development of industries both in the united states and in world markets a colleague of stan s at rochester lionel mckenzie once commented that in 19th century britain lancashire would have been unlikely to produce cotton cloth if the cotton had to be grown in england mckenzie 1954 this remark expresses in utter brevity the importance to production and trading patterns of the domain of tradability of raw materials or intermediate products for example it is difficult to envisage the patterns of production and trade in modern day japan should it be denied access to world supplies of oil coal and iron ore local production of each of these items being negligible transport costs as well as man made impediments to trade are mainly responsible for variations in the degree of access countries possess to the inputs available in the markets of other countries simple competitive generalequilibrium models of production of the type intensively utilized in the theory of international trade can usefully be harnessed to shed light on several episodes in 19th century american economic history in which the nature of trading possibilities for raw materials heavily influenced the extent to which local american production of final commodities could withstand the pressures in world markets without the aid of protective devices the simplest model setting in which to investigate the importance of trade in raw materials is a ricardian model augmented by the necessity of using a produced input in addition to labor in at least one commodity denote the pair of final commodities by x and y where in order to produce y a certain quantity of intermediate good z is required the competitive profit conditions for the two final commodities are shown in equation 1

correctly analysing the balance of payments constraint on growth the balance of payments constrained growth bpcg model provides an interesting hypothesis regarding economic growth the main implication is that world demand places the dominant constraint to which individual country growth adjusts i discuss this implication and argue that tests of the bpcg model have essentially been tests of the hypothesis that trade is balanced over the long run a plausible hypothesis but one that need not hold mainly through responses to world demand as transmitted via income elasticities i then discuss the role of relative prices and investment point out logical inadequacies in the traditional bpcg framework and suggest an alternative theoretical framework to investigate its robustness our theoretical and empirical explorations suggest that traditional tests of the bpcg model may be misleading including investment as a proxy for the capacity to export and addressing endogeneity issues for example noticeably weakens the influence of world demand the evidence presented contributes to reconciling evidence supporting the bpcg hypothesis with recent work that consistently finds an important role for the level of the real exchange rate and investment independently of world demand

understanding the behavior of bank spreads in latin america abstract over the last decade many countries in latin america have eliminated interest rate ceilings reduced reserve requirements and stopped direct credit controls these market oriented reforms have encouraged financial deepening thereby producing considerable economic benefits to the countries nevertheless the persistence of high interest rate spreads has been a disquieting outcome of the reforms this paper explores the determinants of bank spreads in a systematic way for argentina bolivia chile colombia mexico peru and uruguay during the mid 1990s the analysis shows that high operating costs raise spreads as do high levels of non performing loans although the size of these effects differs across the countries in addition reserve requirements in a number of countries still act as a tax on banks that gets translated into a higher spread beyond bank specific variables uncertainty in the macroeconomic environment facing banks appears to increase interest spreads the combination of these microeconomic and macroeconomic factors is a cause for concern in latin america as spreads widen the cost of using the financial system becomes prohibitive to some potential borrowers in addition the results suggest that bank capital requirements may not prevent excessive risk taking by banks when bank spreads are high

assessing the impact of financial liberalisation on stock market volatility in selected developing countries this article argues for the importance of measuring stock market volatility following financial liberalisation in developing countries three alternative indices for measuring volatility are developed these are used to examine the view that financial liberalisation induces increased asset price volatility based on the limited data available this view is corroborated in the majority of countries investigated

volatility of short term capital flows and private investment in emerging markets abstract using micro level panel data the paper analyses the impacts of short term capital flow volatility on new fixed investment spending of publicly traded real sector firms in three major emerging markets argentina mexico and turkey the empirical results including sensitivity tests suggest that increasing volatility of capital inflows has an economically and statistically significant negative effect on new investment spending of private firms accordingly a 10 per cent increase in capital flow volatility reduces fixed investment spending in the range of 1 1 7 2 3 15 and 1 per cent in argentina mexico and turkey respectively

how responsive is business capital formation to its user cost an exploration with micro data abstract the response of business capital formation to its user cost is critical to evaluating tax reform deficit reduction and monetary policy evidence for a substantial user cost elasticity however is sparse most evidence has been based on aggregate data although several recent studies with firm level data report substantial effects with a particularly rich micro dataset containing over 26 000 observations this paper explores what can be learned about the user cost elasticity while the results depend to some extent on the specification and econometric technique various diagnostics lead us to prefer a precisely estimated but small elasticity of approximately 0 25 this paper is dedicated to the memory of robert eisner who labored early and ably on uncovering the determinants of investment spending and highlighting the importance of the question found in the title of this paper

interacting factor endowments and trade costs a multi country multi good approach to trade theory abstract we provide a synthetic analysis of the different ways in which countries participate in the world economy classic trade questions are reconsidered by generalizing a factor proportions model to multiple countries multiple goods or multi stage production and country specific trade costs each country s production specialization trade and welfare is determined by the interaction between its relative endowment and its trade costs we consider the effects of allowing one good to fragment into component and assembly production the volume of trade and welfare levels are higher with fragmentation for most countries although for many countries these variables fall with fragmentation

structural change the real exchange rate and the balance of payments in mexico 1960 2012 this paper estimates a structural model of the balance of payments with disaggregated exports manufactures and other and imports final and intermediate and a reduced form model of the trade balance for the mexican economy the analysis identifies structural changes in the composition of mexico s trade and the parameters that affect it across five subperiods marked by statistical breakpoints the results indicate that a tightening of the balance of payments constraint may account for the post liberalization slowdown in mexico s growth only during certain subperiods and that the impact of real exchange rate changes on the trade balance has diminished most likely as a result of the increasing integration of export industries into global supply chains the results also suggest an asymmetry whereby a country cannot sustain growth above the rate consistent with balance of payments equilibrium as expected but it can grow persistently below that rate when other constraints are more binding

how effective are capital controls a number of authors have recently argued that in order to avoid financial instability emerging countries should rely on capital controls two type of controls have been considered controls on capital outflows and controls on capital inflows in this paper i review the historical evidence on the effectiveness of these two type of controls i argue that controls on outflows have been ineffective they are circumvented and breed corruption i also analyze chile s recent experience with controls on inflows and i argue that their effectiveness has been exaggerated

international outsourcing and factor prices with multistage production we develop a dual representation of the technology of international fragmentation for an industry using 2 factors in a continuum of stages we then derive a generalised factor price frontier which incorporates an endogenous adjustment of the margin of fragmentation using this frontier in a 2 2 general equilibrium model we investigate the role of outsourcing in the adjustment to a decline in the final output price of the multistage industry and the attendant factor price effects we also explore the implications of an improved technology of international fragmentation on the margin of fragmentation and on domestic factor prices

not your grandfather s imf global crisis productive incoherence and developmental policy space the response by the international monetary fund imf and developing country national governments to the current global financial crisis represents a moment of what i term productive incoherence which has displaced the constraining neoliberal coherence of the past several decades productive incoherence refers to the proliferation of inconsistent and even contradictory strategies and statements by the imf that to date have not congealed into any sort of new organised regime those who see continuity at the imf emphasise the reassertion of the imf s authority the reiteration of pro cyclical policy adjustment and the maintenance of existing governance patterns within the institution in contrast evidence of discontinuity includes a world now populated by increasingly autonomous states in the south the normalisation of capital controls and fund conditionality programmes that are inconsistent in key respects in the face of this evidence it is best to understand the current conjuncture as an interregnum that is pregnant with new development possibilities

instability and volatility of capital flows to developing countries despite the recent recovery in capital flows towards developing countries some of their characteristics have generated serious problems as these flows are increasingly concentrated in a small group of emerging markets most developing countries have been facing a severe scarcity of external resources while for the minority endowed with some measure of access to international financial markets volatility and sustainability remain the key issues financial liberalisation has helped to create new channels for resource transfers from the developed world but it has also generated conditions wherein such transfers can easily be reversed with serious consequences in terms of instability the present study depicts discusses and analyses some of the issues related to capital movements between developed and developing countries section 2 is an overview of the recent controversies on external financial liberalisation section 2 is an surveys the post 1970 developments in capital inflows to developing countries their main components and their contribution to development finance section 4 examines the instability and volatility of total inflows and their components using two different statistical measures section 5 concentrates on a particular type of capital movement i e short term arbitrage seeking capital flows to emerging market economies this analysis requires specific conceptualisation definition and data generation from balance of payments statistics in section 6 a similar analysis of volatility and instability of short term inflows and outflows to emerging market economies is undertaken the penultimate section 7 discusses the policy implications of the foregoing analysis and is followed by a summary and conclusions

factor bias and technical progress abstract the role of factor bias in technical progress has been a bone of contention between labor economists and international trade theorists by considering progress that results in finite changes in techniques these two views can be reconciled for example labor saving technical progress can result in lowered real wages even if it is concentrated in the more labor intensive of two commodities initially produced

financial crises after financial liberalisation exceptional circumstances or structural weakness in this article i argue that emerging economies are systematically becoming more susceptible to both currency and banking crises after financial liberalisation fl using data for 27 emerging economies from 1973 to 1998 univariate and multivariate analyses indicate that the likelihood of currency crises and banking crises increase after fl in particular liberalisation allows more liquidity to enter an emerging economy which finds its way into productive and speculative projects what is common to both types of crises is a significant increase in speculative financing thereby increasing the chance for borrower default thus the outflow of international capital becomes more likely the chance of a crisis occurring in response to changes in short term loans is greater after fl than before similarly the chance of a currency crisis occurring following a currency overvaluation is larger after fl than before in comparison the likelihood of a banking crisis occurring in response to an overvalued curre

trade and protection with multistage production this paper analyses trade in manuf acutured goods that are produced via a vertical production structure with many stages where some value is added at each to an intermediate product to yield a good in process ready for the next stage we consider the stage at which a good is traded to be an economically endogenous variable with comparative advantage determining the pattern of production specialization by stages across countries we study how endowment changes and policy shifts move the margin of comparative advantage which thus provides a channel for resource allocation adjustment that is additional to the usual ones of factor substitution and changes in the quantity of output

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

currency crashes in emerging markets an empirical treatment we use a panel of annual data for over 100 developing countries from 1971 through 1992 to characterize currency crashes we define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation we examine the composition of the debt as well as its level and a variety of other macroeconomic factors external and foreign crashes tend to occur when output growth is low the growth of domestic credit is high and the level of foreign interest rates are high a low ratio of fdi to debt is consistently associated with a high likelihood of a crash

capital markets urban unemployment and land abstract this paper shows that the remarkable result by khan and naqvi that a reduction in the capital rental differential always improves welfare despite the presence of a rigid urban wage can be obtained only for the 2 2 harris todaro model in an extended harris todaro framework incorporating a third specific factor a decrease in a distortion may not necessarily be welfare improving

industrial policy and exchange rate scepticism the aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies the first section focuses on the thought of the so called pioneers of development economics specifically their preference for protectionism and their belated recognition that an exchange rate policy could act as a substitute to it in the second one we analyze the exchange rate skepticism that arises out of the theories that identify a foreign constraint to growth in addition to the one revealed by the pioneers the third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short run contractionary effects of a devaluation reinforcing the skepticism in question in the fourth section we discuss the revival of development thinking in the 1980s and its discussion about east asian trajectories a literature that placed great emphasis on industrial policy finally in the fifth section we discuss the new historical facts and the new development macroeconomics models that are putting an end to exchange rate skepticism

some simple results on the gains from trade from growth and from public production abstract a simple compact but general revealed preference type of argument is used to derive results on the gains from trade from terms of trade changes and from exogenous resource growth the approach extends to the welfare evaluation of public sector production the relation between the sufficiency conditions for welfare improvement derived from this approach and the necessary and sufficient conditions derived in an alternative approach are briefly discussed most of the argument is conducted in the context of a representative individual economy though it is shown to extend in an essentially unchanged way to cases where redistribution is an issue

solvency rule and capital centralisation in a monetary union brancaccio and fontana 2013 have suggested that the central bank influences the solvency conditions of firms and households in the economic system this solvency rule is examined here within a stylised model of a monetary union characterised by different rates of accumulation and inflation across its two member countries the rule highlights the existence of a relationship between the interest rate set by the central monetary authority and the allocation of ownership of existing physical capital among the member countries of the monetary union i e the rates of capital centralisation the paper also shows the nexus between solvency and government debt sustainability and examines the implications of deflationary or currency devaluation policies for the solvency conditions

does vertical specialization increase productivity this paper investigates the impact of global value chain participation on productivity using data on trade in value added from the world input output database the results based on a panel estimation covering 13 sectors in 40 countries over 15 years suggest that participation in global value chains is a significant driver of labor productivity backward participation in global value chains that is the use of imported inputs to produce for exports emerges as particularly important an increase by 10 percent in the level of global value chain participation increased average productivity by close to 1 7 percent

unemployment and the real exchange rate in latin america summary today unemployment rates in several latin american countries are similar or even higher than the highest unemployment rates among oecd economies open unemployment has become for the first time in the region s history a major dimension of the employment problem this paper examines the role of the real exchange rate rer in the recent unemployment performance of latin america it presents a model of the determinants of unemployment the channels through which the rer influences unemployment performance as well as the stylized facts and empirical results about this relationship giving special attention to the cases of argentina brazil chile and mexico 2006 elsevier ltd all rights reserved

real exchange rate behavior and economic performance in ldcs in recent years policy discussions have included increasing references to real exchange rate rer stability and correct exchange rate alignment as crucial conditions to improve economic performance in less developed countries ldcs 1 evidence from latin american asian and african countries is often quoted to support the view that the link between rer behavior and economic performance is strong it is argued that while unstable rers inhibited export growth in some of latin america their stability was fundamental in promoting east asian expansion in many african countries on the other hand persistently misaligned local currencies harmed the development of agriculture reducing domestic food supply 2 but in spite of its importance no empirical work has been attempted either to test the relationship between rer behavior and performance indicators at a broad multicountry level or to investigate the sources of rer variability and misalignment in ldcs the theoretical literature on rer determinants has been recently surveyed by sebastian edwards 3 he distinguishes between equilibrium and disequilibrium rers and between external and domestic rer determinants although domestic policies are often said to account for significant rer variations empirical work has only concentrated on the effect of nominal devaluations4 or speculative crises arising from expansionary monetary policies in a system of fixed ex

the perils of unearned foreign income aid remittances and government survival given their political incentives governments in more autocratic polities can strategically channel unearned government and household income in the form of foreign aid and remittances to finance patronage which extends their tenure in political office i substantiate this claim with duration models of government turnover for a sample of 97 countries between 1975 and 2004 unearned foreign income received in more autocratic countries reduces the likelihood of government turnover regime collapse and outbreaks of major political discontent to allay potential concerns with endogeneity i harness a natural experiment of oil price driven aid and remittance flows to poor non oil producing muslim autocracies the instrumental variables results confirm the baseline finding that authoritarian governments can harness unearned foreign income to prolong their rule finally i provide evidence of the underlying causal mechanisms that governments in autocracies use aid and remittances inflows to reduce their expenditures on welfare goods to fund patronage

diverging trends in aggregate and firm volatility this note documents the diverging trends in volatility of the growth rate of sales at the aggregate and firm levels we establish that the upward trend in firm volatility is not simply driven by a compositional bias in the sample studied we argue that this new fact brings into question the proposed explanations for the decline in aggregate volatility and that given the symmetry of the diverging trends at the micro and macro levels a common explanation is likely we conclude by describing one such theory

the great crash of 2008 and the reform of economics the 2008 economic crash led to remarkable shifts of opinion among world leaders does this crisis create favourable conditions for the reform and revitalisation of economics itself from a subject dominated by mathematical techniques to a discipline more oriented to understanding real world institutions and actors and why were warnings of financial collapse not heeded recent shortcomings are partly related to the global triumph of market individualist ideology and partly to the exaggerated roles of modelling and quantification these failures of economics are partly peculiar to the discipline and also a result of other wider institutional and cultural forces

the new wave of private capital inflows push or pull abstract this paper studies the determinants and sustainability of the widespread private capital inflows to middle income countries after 1989 the key question is whether these flows are mostly pulled by attractive domestic conditions or pushed by unfavorable conditions in developed countries an analytical model focusing on country risk is developed and used empirically it is argued that the observed improvement in country creditworthiness is mostly due to the decline in international interest rates and that therefore its importance as a proximate cause does not support the pull interpretation all things considered in most countries the key answer that emerges is push

interest rates and investment in east asia an empirical evaluation of various financial liberalisation hypotheses the article attempts to shed light on the appropriate interest rate policy in the process of economic development to this end we examine whether higher interest rates lead to higher investment and growth in four east asian countries we find that the investment rate went up with real interest rates up to 9 per cent in all four countries but started declining at still higher interest rates in two of the countries further a banking crisis occurred in each of the three countries for which the real interest rates exceeded 9 per cent this evidence rejects the neo structuralist argument nor does it support unbridled financial liberalisation yet it provides only limited support to stiglitz s case for mild financial repression real interest rates near zero since reducing real interest rates from say 6 to 3 or 0 per cent would have reduced investment the optimum policy seems to be closest to mckinnon s restrained financial liberalisation policy that is liberalisation with a moderate upper lim

ground truthing chinese development finance in africa field evidence from south africa and uganda abstracta new methodology tracking underreported financial flows tuff leverages open source information on development finance by non transparent non western donors if such open source methods prove to be valid and reliable they can enhance our understanding of the causes and consequences of development finance from non transparent donors including but not limited to china but open source methods face charges of inaccuracy in this study we create and field test a replicable ground truthing methodology to verify update and improve open source data with in person interviews and site visits in uganda and south africa ground truthing generally reveals close agreement between open source data and answers to protocol questions from informants with official roles in the chinese funded projects our findings suggest that open source data collection while limited in knowable ways can provide a stronger empirical foundation for research on development finance

growth and welfare in a small open economy the literature on trade and growth provides several examples in which factor augmentation or technical progress can reduce the welfare of an open economy the most famous example of such immiserizing growth is bhagwati s 1958 demonstration that growth that expands the export industry can reduce welfare by causing the terms of trade to deteriorate more recently examples have been provided in which growth due to either factor expansion or technical progress in the presence of domestic distortions can be immiserizing even in a small open economy johnson 1967 for example shows that technical progress in the import competing industry or growth of the factor used intensively in that industry can reduce welfare if the industry is protected by a tariff similarly bhagwati 1969 shows that the presence of factor market distortions also introduces the possibility of immiserizing growth he concludes more generally that growth may be immiserizing in the presence of any of several types of distortions while the possibility of immiserizing growth in the presence of distortions has been recognized little has been said about conditions under which growth is necessarily non beneficial or non harmful the present paper derives sufficient conditions for growth in the form of either factor augmentation or technical progress not to immiserize a small open economy characterized by variable returns to scale vrs production and consumption taxes tariffs and factor market distortions moreover in each case we provide an explicit condition for the effect of growth on welfare when growth takes the form of an infinitesimal increase in a factor supply or improvement in technology 1 our analysis departs from previous treatments of immiserizing growth by considering growth in an m factor n 1 commodity context with non traded goods rather than in the standard two factor two commodity model 2 this generalization allows us to consider for example the welfare effect of growth in the presence of tariffs when not all imports are affected in the same direction 3 we do however provide some additional results for the 2 x 2 case section i sets forth the general model that we use throughout our analysis here we show that under constant returns to scale crs in production and in the absence of commodity or factor market distortions growth cannot immiserize a small open economy while this result is not entirely new the proof provides a useful benchmark for our subsequent analysis section ii introduces vrs in production and considers their implications for the effect of growth on welfare a discussion of these results for the two commodity one factor case follows in section iii here we examine the relationship between factor growth or technical progress and the composition of output in section iv we return to the mr factor n 1 commodity model to analyse the implications of taxes for the relationship between growth and welfare

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

macroeconomic constraints to growth of the brazilian economy diagnosis and some policy proposals the recent accelerated expansion of the brazilian economy from 2004 to 2007 was driven by exports and gross fixed capital formation although this pace of growth is more robust than it was in the 1990s we can still witness the presence of macroeconomic constraints to its continuation in the long term such as the exchange rate overvaluation particularly since 2005 and in general the modus operandi of monetary policy such constraints may jeopardise the sustainability of the current pace of growth we argue that brazil still lies in a trap made up of high interest and low exchange rates the elimination of the exchange rate misalignment would bring about a large increase in the rate of interest which in turn would impact negatively upon investment and hence upon long term growth we indicate a set of policy measures to eliminate such a trap in particular the adoption of an implicit exchange rate target capital controls and the substitution of the present regime of inflation targeting with a double mandate regime where monetary authorities must pursue two objectives i e output stabilisation and inflation control recent events seem to go in this direction

trade in goods and trade in tasks an integrating framework abstract we introduce a simple but flexible analytical framework in which both trade in goods and trade in tasks arise we use this framework to provide versions of the gains from trade and the famous four ho theorems heckscher ohlin factor price equalisation stolper samuelson and rybczynski that apply to this environment we extend our framework to accommodate monopolistic competition and two way offshoring and to integrate theoretical results of the early offshoring literature

iceland s rise fall stabilisation and beyond iceland is an unusually pure example of the dynamics that blocked regulation and caused financial fragility across the developed world for 20 years this essay describes the statist and corporatist political economy of the country as it soared from near the bottom of the western european income hierarchy at the end of the world war ii to up near the top by the 1980s it illustrates how a group of neoliberal politicians and allied civil servants drove through selective deregulation and privatisation in the 1990s and 2000s in the space created for newly privatised banks icelandic financiers grew the banks and linked private equity firms through mergers and acquisitions abroad to the point where by 2007 tiny iceland supported three banks in the world s biggest 300 banks with assets eight times the gdp second highest in the world after switzerland as profits from these overseas operations were partly redistributed back to iceland the economy boomed in the grip of super minsky processes the government the banks and the media interpreted the boom as testimony to the validity of neoliberal policies and went out of their way to hide increasing financial fragility from view preventing a negative or self correcting policy feedback loop the accident waiting to happen happened in the wake of the lehman collapse in september 2008 the essay charts the zigzags of the government s response and the citizens response and discusses the prospects for a resumption of growth on a more sustainable basis it suggests that iceland illustrates in miniature the ratcheting down of mass living standards underway across the western world now that the cushion of debt has been removed even as financiers and others in the top few percentiles of national income distributions increase their share of national income but economic institutions and politics matter in iceland the large devaluation spread the cut in a relatively apolitical way the government let the banks go bust rather than bail them out at taxpayers expense it imposed capital controls on outflows and it used fiscal transfers to protect the bottom half of the population from disproportionate cuts

managing capital accounts in emerging markets lessons from the global financial crisis abstract the global financial crisis forcefully highlighted the importance of curbing the impact of large and volatile capital inflows on growth and financial stability in developing countries it led the imf to reconsider its long standing rejection of capital controls yet its new macroeconomic policy first approach has to be reconciled with the hybrid nature of banking activity and its role in transmitting global shocks a consideration of dominant actors and strategies of intermediating capital inflows offers distinct policy options ranging from carefully designed central bank strategies to institutional changes that realign bank incentives towards longer horizons and sustainable growth models

real exchange rate levels and economic development theoretical analysis and econometric evidence according to the development approach to exchange rates competitive currencies have been a key factor in most east and southeast asian successful growth strategies there is also today an important empirical literature that relates overvaluations to low per capita growth rates while the econometric literature on this issue is relatively rich theoretical analysis of channels through which real exchange rate levels could affect economic development are very scarce this paper intends to contribute to the debate by bringing more theoretical elements and providing new econometric evidence to the connections between real exchange rate levels and development

offshoring of routine tasks and de industrialisation threat or opportunity and for whom abstract offshoring or overseas sourcing of routine tasks generates efficiency gains that benefit consumers and workers with skills similar to those whose very jobs are threatened by offshoring essentially the interaction between offshoring footloose capital and agglomeration economies locks the comparative advantage of advanced nations in complex or strategic functions while labour services in routine tasks the coordination of which is easily codified are provided by low wage developing nations through the fibre optic cable in this framework the partial equilibrium view that offshoring is necessarily detrimental to workers in advanced nations is misguided because the implicit counterfactual that keeping the off shored jobs would have no macroeconomic impact on the economy is not warranted in addition inasmuch as routine tasks create few positive feedbacks trade in tasks can be an impediment to income convergence unlike trade in goods in short this paper qualifies the views that offshoring hurts workers in the north and accelerates income convergence between the north and the south

unemployment and the real wage the economic basis for contesting political ideologies using the keynesian theory of effective demand this paper demonstrates how particular models such as that of cooperative capitalism enunciated by the left keynesian social democrats the marxian model of profit squeeze emphasizing distributive conflict and even the conservative model relying on supply side stimulus fit in as particular variants of a more general theoretical scheme through a reconstruction of the familiar is schedule the argument is weaved around the theme of the relations between unemployment and real wage in the context of both a closed and an open economy to explain the common macroeconomic basis of contesting ideologies copyright 1990 by oxford university press

how many us jobs might be offshorable using detailed information on the nature of work done in over 800 us bureau of labor statistics occupational codes this paper ranks those occupations according to how easy hard it is to offshore the work either physically or electronically using this ranking it is estimated that somewhere between 22 and 29 of all us jobs are or will be potentially offshorable within a decade or two no estimate is made of how many jobs will actually be offshored since the rankings are subjective two alternatives are presented one is entirely objective the other is an independent subjective ranking in general they corroborate the rankings albeit not perfectly it is found that there is little or no correlation between an occupation s offshorability and the skill level of its workers as measured either by educational attainment or wages however it appears that controlling for education the most highly offshorable occupations were already paying significantly lower wages in 2004

factor content functions and the theory of international trade this paper introduces the concepts of direct and indirect factor trade utility functions and uses them to derive marshallian and hicksian factor content functions which express the quantities of factors of production embodied in net imports as functions of the exogenous variables facing the economy the properties of these functions are discussed and they are used to derive a number of new results in particular it is shown that in certain circumstances the existence of gains from trade is sufficient for the heckscher ohlin theorem to hold in its factor content form

trade in producer services and returns due to specialization under monopolistic competition this paper demonstrates that liberalizing trade in services while yielding efficiency gains associated with comparative advantage may yield additional gains for both importing and exporting countries because of an increased division of labor a model is developed in which producer services coordinate and control the specialized members of complex production processes the model is used to analyze trade in services and its effect on the division of labor and the realization of returns from specialization this differs from the recent literature on traded services and specialization because of the explicit role introduced for services in the specialization process

more dollars than sense refining our knowledge of development finance using aiddata summary in this introductory essay to the special issue we introduce a new dataset of foreign assistance aiddata that covers more bilateral and multilateral donors and more types of aid than existing datasets while also improving project level information about the purposes and activities funded by aid we utilize that data to provide a brief overview of important trends in foreign aid contributors to this special issue draw on aiddata as well as other sources to analyze aid transparency new donors not previously described or analyzed aid allocation and aid effectiveness our recurring theme in this introductory essay is that aiddata and these initial academic projects refine rather than revolutionize our understanding of aid the database has added significant numbers of new projects dollar amounts donors and details about those projects though there is much more yet to add we worry that aid debates have been driven by too little information and that many claims are based on limited or very poor evidence rectifying these problems will not be instantaneous refining knowledge takes a lot of time and hard work the common feature of the papers in this special issue is their careful attention to nuance and detail in spite of what some recent authors have claimed aid is neither a simple solution nor a sufficient cause of most problems in developing countries its motivations distribution and effects are complex and shifting capturing this complexity requires detailed data careful thought and sophisticated methods that allow scholars to make conditional causal and descriptive inferences 2011 elsevier ltd all rights reserved

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association