financial dollarization short run determinants in transition economies this paper examines the determinants of financial dollarization in transition economies from a short run perspective using aggregate monthly data of deposit and loan dollarization we study the drivers of short term fluctuations in dollarization and test their importance at different levels of dollarization the results provide evidence that a the positive negative short run effects of depreciation monetary expansion on deposit dollarization are exacerbated in high dollarization countries b short run loan dollarization is mainly driven by banks matching of domestic loans and deposits currency matching of assets and liabilities international financial integration and institutional quality and c both types of short run dollarization are affected by interest rate differentials and deviations from desired dollarization

buyer power with atomistic upstream entry can downstream consolidation increase production and welfare abstract this paper investigates the effects of buyer power on entry into an atomistic upstream market and economic welfare under reasonable market conditions we show that industries with a few buyers induce more upstream entry than industries with a larger number of firms in particular monopsony can be more conducive to entry and lead to higher social welfare than more fragmented industry structures this seeming paradox arises because a single buyer better internalizes the positive effects of entry on later periods supply conditions than a collection of firms this result is relevant in a number of market settings including markets for specialized labor and processing markets for agricultural products

credibility versus control agency independence and partisan influence in the regulatory state there is a natural tension between theories of party government and theories of regulatory politics whereas effective party government requires that politicians have firm control over public polic

spatial price discrimination in agricultural product procurement markets a computational economics approach significant transport costs and spatially distributed supply and processing create oligopsony power in agricultural markets price discrimination expressed in the form of partial or complete absorption of freight charges by processors is often observed in these environments but we understand little about how these pricing decisions are made analytical approaches are often intractable as an alternative we propose a computational economics approach to analyze a general spatial competition model and study firms choices of spatial pricing policy instead of the commonly presumed free on board pricing we find that buyers choose price discrimination either through uniform delivered pricing or through partial freight absorption

too many cooks committees in monetary policy how many people should decide about monetary policy in this paper we take an empirical perspective on this issue analyzing the relationship between the number of monetary policy decisionmakers and monetary policy outcomes using a new data set that characterizes monetary policy committees mpcs in more than 30 countries from 1960 through 2000 we find a u shaped relation between the membership size of mpcs and inflation our results suggest that the lowest level of inflation is reached at mpcs with about seven to ten members similar results are obtained for other measures such as inflation variability and output growth we also find that mpc size influences the success of monetary targeting regimes in contrast there is no evidence that either turnover rates of mpc members or the membership composition of mpcs affect economic outcomes

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

the competitive implications of top of the market and related contract pricing clauses this article examines the competitive implications of contract pricing arrangements which link the contract price to the subsequent cash price we focus on so called top of the market pricing tomp in cattle procurement the tomp clause is shown to have anticompetitive consequences when the same buyers who purchase contract cattle with the tomp clause also compete to procure cattle in the subsequent spot market the tomp clause reduces packers incentives to compete aggressively in the spot market although tomp pricing is not in producers collective interest rational sellers may nonetheless sign these contracts with little or no financial inducement

toward a political theory of the emergence of environmental incentive regulation this article makes some steps toward a formal political economy of environmental policy economists quasi unanimous preference for sophisticated incentive regulation is reconsidered we recast the question of instrument choice in the general mechanism design literature within an incomplete contract approach to political economy we show why constitutional constraints on the instruments of environmental policy may be desirable even though they appear inefficient from a standard economic viewpoint their justification lies in the limitations they impose on the politicians ability to distribute rents insights are provided on the emergence of incentive mechanisms in environmental regulation

assessing the importance of oligopsony power in agricultural markets oligopoly competition among few sellers is the cornerstone of industrial organization io conversely its sister concept oligopsony competition among few buyers is scarcely mentioned for example oligopsony is not discussed in the entire two volume handbook of industrial organization and monopsony is mentioned only in the context of incentives to integrate vertically two reasons apparently account for io economists lack of interest in buyer market power i they don t think it s very important and ii they don t believe it presents any unique modeling issues relative to seller market power scherer and ross illustrate this first viewpoint arguing that average concentration on the buyers side in manufacturing is undoubtedly lower than seller concentration p 519 tirole in his masterful treatise on io theory illustrates the second dispatching monopsony power in one sentence naturally the conclusions regarding monopoly power would also hold as well for monopsony power p 65 we argue that this dismissive treatment of buyer market power is not reasonable for economists interested in agriculture and agricultural markets the scherer and ross viewpoint may apply when considering generic inputs such as labor capital and energy competition for these inputs is apt to exceed competition for the outputs they produce because firms cross product market boundaries to compete for these inputs and there is essentially no branding among input buyers to diminish price competition among them moreover these inputs are typically mobile hence in elastic supply to individual buyers limiting the exercise of oligopsony power even in geographic settings where relatively few buyers prevail this view of input markets does not apply however to first handler markets for the raw agricultural commodities that are inputs into the processed or fresh packed food products we identify the following distinctive structural characteristics of these markets

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

is the troika bad for the environment an analysis of eu countries environmental performance in times of economic downturn and austerity memoranda abstract in this paper we examine the effect of the current economic crisis on the environmental performance of the eu countries by employing hierarchical linear multilevel hlm modeling we find that for the period 2000 2015 a drop in the national gdp a recession effect as well as endorsing a memorandum of understanding mou for receiving a imf eu ecb financial rescue package a troika effect have non significant to positive impacts on a number of national environmental quality and policy indicators over and above other economic political and governance predictors for eurozone and non eurozone countries alike nevertheless this changes drastically if we examine these two factors interaction experiencing a recession while being a recipient of a troika sponsored rescue package has detrimental effects on an eu country s national environment

bankruptcy costs liability dollarization and vulnerability to sudden stops abstract countries with intermediate levels of institutional quality suffer larger output contractions following sudden stops of capital inflows than less developed nations however countries with strong institutions seldom experience significant falls in output after capital flow reversals we reconcile these two observations using a calibrated dsge model that extends the financial accelerator framework developed in bernanke gertler and gilchrist 1999 the model captures financial market institutional quality with creditors ability to recover assets from bankrupt firms bankruptcy costs affect vulnerability to sudden stops directly but also indirectly by affecting the degree of liability dollarization simulations reveal an inverted u shaped relationship between bankruptcy costs and the output loss following sudden stops

political internalization of economic externalities and environmental policy abstract this paper derives the characteristics of endogenous environmental policy in a common agency model of politics and proceeds to show that competition between lobby groups is an important source of internalization of economic externalities our analysis generalizes bhagwati s principle of targeting to the case of distorted political markets moreover we show that the politically optimal structure of environmental taxes incorporates a pigouvian adjustment however since lobby groups care about the distribution of income as well as about efficiency the equilibrium structure of taxes differs considerably from the pigouvian rule

fiscal deficits and inflation abstract macroeconomic theory postulates that persistent fiscal deficits are inflationary yet empirical research has had limited success in uncovering this relationship this paper reexamines the issue in light of broader data and a new modeling approach that incorporates two key features of the theory unlike previous studies we model inflation as non linearly related to fiscal deficits through the inflation tax base and estimate this relationship as intrinsically dynamic using panel techniques that explicitly distinguish between short and long run effects of fiscal deficits results spanning 107 countries over 1960 2001 show a strong positive association between deficits and inflation among high inflation and developing country groups but not among low inflation advanced economies

sudden stops are global and local investors alike the main goal of this paper is to characterize the determinants of sudden stops caused by domestic vis a vis foreign residents are the decisions of domestic investors to invest abroad or of foreign investors to cut off funds from the domestic economy governed by the same set of determinants given the distribution of different types of sudden stop episodes over time and its different macroeconomic consequences the authors argue that the determinants may not be alike using an effective sample of 82 countries with annual information over the period 1970 2007 the analysis finds that global investors are less likely to stop bringing their capital when their economy is growing and the world interest rate is lower domestic agents are more willing to invest abroad if the macroeconomic performance of the domestic economy is poor high inflation the financial system is weak and there are high external savings current account surpluses increasing financial openness makes the domestic country more vulnerable to sudden stops caused by either local or global investors finally countries with higher shares of foreign direct investment are less prone to inflow driven sudden stops whereas the opposite holds for outflow driven sudden stops

hedging and financial fragility in fixed exchange rate regimes currency crises that coincide with banking crises tend to share at least three elements first banks have a currency mismatch between their assets and liabilities second banks do not completely hedge the associated exchange rate risk third there are implicit government guarantees to banks and their foreign creditors this paper argues that the first two features arise from banks optimal response to government guarantees we show that guarantees completely eliminate banks incentives to hedge the risk of a devaluation our model also articulates one reason why governments might be tempted to provide guarantees to bank creditors guarantees lower the domestic interest rate and lead to a boom in economic activity but this boom comes at the cost of a more fragile banking system in the event of a devaluation banks renege on foreign debts and declare bankruptcy

institutions and financial dollarization indirect effects based on a policy experiment we provide evidence that institutional improvements lead to lower levels of financial dollarization through previously unidentified channels these indirect channels operate in addition to the direct impact identified in the literature and further illustrate the importance of institutions for the extent of banking dollarization

distinguishing the source of market power structural models used to measure market power though widely employed continue to be criticized we compare alternative market power tests including nonparametric and solow residual based srb tests we develop srb methods that permit nested testing for both monopolistic and monopsonistic market power by the same firm these tests and a set of nonparametric tests are implemented to examine market power exertion by u s cigarette manufacturers from 1977 to 1993 all tests indicate that cigarette manufacturers exerted monopsonistic power in the upstream tobacco market they are mixed on whether monopolistic power exertion was exerted in the downstream market

does globalization affect growth evidence from a new index of globalization the study develops an index of globalization covering its three main dimensions economic integration social integration and political integration using panel data for 123 countries in 1970 2000 it is analysed empirically whether the overall index of globalization as well as sub indexes constructed to measure the single dimensions affect economic growth as the results show globalization indeed promotes growth the dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries although less robustly information flows also promote growth whereas political integration has no effect

new evidence on the relationship between democracy and economic growth it is often maintained that democracy is a luxury which comes at a price in terms of subsequent slower increases in national living standards however various recent cross section studies on economic growth have found evidence that lack of civil and political liberties is negatively correlated with economic growth using a new measure of democracy which is based upon the number of years that a country can be regarded as a democracy the robustness of this relationship is examined both direct and indirect effects of lack of democratic liberties are analysed our main conclusion is that the relationship between democracy and economic growth is not rubust

the new political economy of taxation in advanced capitalist democracies earlier versions of this paper were presented at the 1999 annual meeting of the american political science association september 1 5 atlanta ga and the 2000 annual meeting of the midwest political science association april 27 30 chicago il the authors thank steffen ganghof philip genschel mark hallerberg alex hicks william keech dennis quinn and the anonymous reviewers and editor of this journal for many helpful comments and dennis quinn for generously sharing data duane swank thanks the german marshal fund of the united states and marquette university for support of work incorporated in this paper data utilized in this paper are available from duane swank marquette edu

political influence on the central bank international evidence political influence on the central bank is measured bere by looking at the probability that a central bank governor will be replaced shortly after a political change of government the governor changes about half the time witbin six months of a nonconstitutional or other radical change of government a military coup or a restoration of democracy the governor is much less likely to change within six months following a routine change in the head of government about one fourth of the time in developing countries and one tenth in industrial countries these indicators vary across countries and correlate statistically with inflation and its variability and with real growth and real interest rates differences in the vulnerability of the central bank to political instability in political instability itself and in central bank turnover in nonpolitical periods seem to be a major part of the explanation for why developing countries have on average higher and more variable inflation than industrial countries do

competitiveness and exemptions from environmental taxes in europe a number of european countries have introduced a variety of environmental taxes a common characteristic of their implementation is the inclusion of exemptions and tax relief in particular for some sectors of manufacturing industry this paper analyses the pattern and motivation of exemptions as they have developed in western european countries making clear the difference between the nominal and effective tax rates once the exemptions have been taken into account the principal motivation for exemptions relates to concern about competitiveness while particular environmentally intensive sectors may have some grounds for concern even these might be able to achieve cost effective environmental improvements such that their competitive position is not over disadvantaged while for an economy structured like the uk s an environmental tax plus rebate scheme sometimes called an ecological tax reform would be likely to yield benefits in terms of competitiveness the exemptions usually run counter to the environmental economic logic of using environmental taxes to internalise social costs and give economic signals that are based on the full costs of production and they are likely to increase the costs of achieving a given level of emission reduction with little justification for them also on the grounds of competitiveness it would therefore be undesirable on both economic and environmental grounds for them to remain a feature of the implementation of environmental taxes in the future

lobbying and asymmetric information informational lobbying the use by interest groups of their alleged expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies is often regarded as an important means of influence this paper analyzes this phenomenon in a game setting on the one hand the interest group is assumed to have private information which is relevant to the policymaker whilst on the other hand the policymaker is assumed to be fully aware of the strategic incentives of the interest group to mis report or conceal its private information

the effectiveness of monetary policy anchors firm level evidence analyses of monetary policy posit that exchange rate pegs inflation targets and central bank independence can help anchor private sector inflation expec tations yet there are few direct tests of this argument we offer cross national micro level evidence on the effectiveness of monetary anchors in controlling private sector inflation concerns using firm level data from eighty one countries approximately 10 000 firms we find evidence that international anchors exchange rate commit ments correlate significantly with a substantial reduction in private sector concerns about inflation while domestic anchors inflation targeting and central bank inde pendence do not our conjecture is that private sector inflation expectations are more responsive to exchange rate anchors because they are more transparent more con straining and more costly than domestic anchoring arrangements the literature on monetary policy highlights the role of monetary institutions in stabilizing private sector inflation expectations central bank independence cbi inflation targeting it and fixed exchange rates pegs are widely viewed as insti tutions that have the capacity to mitigate private sector concerns that policymak ers will exploit them after they have locked in their price wage and investment decisions while other empirical research explores the institutional correlates of inflation and its variability yielding mixed results we use firm level data in our study to directly assess the impact of monetary anchors on private sector inflation concerns we find evidence that pegs mitigate firm owners concerns with infla tion but that domestic anchors such as it and cbi are uncorrelated with our micro indicators of inflation expectations considerable research has investigated the use of it cbi and pegs as institu tions that establish monetary policy credibility whereas these anchors are expected

does deposit insurance increase banking system stability an empirical investigation based on evidence of 61 countries in 1980 97 the authors find that explicit deposit insurance tends to be detrimental to bank stability the more so where bank interest rates are deregulated and the institutional environment is weak the adverse impact of deposit insurance on bank stability tends to be stronger the more extensive is the coverage offered to depositors and where the scheme is funded and run by the government rather than the private sector

price floors and technical inefficiency in india s sugar processing industry in india cane is processed into sugar by cooperatives public enterprises and private for profit firms the indian government sets a unique floor price for each processor that is increasing in the firm s effectiveness in converting cane into sugar the floor price binds for public and private firms but not for cooperatives which rebate profits to members we argue that this price floor policy creates a disincentive for private and public firms to be technically efficient in converting cane to sugar in support of this hypothesis an analysis of 593 indian sugar factories from 1992 to 2007 reveals statistically significant differences in technical efficiency with cooperatives being the most efficient and public firms least efficient we estimate welfare losses due to the technical inefficiency attributable to the price floor policy and argue that it can be eliminated by enacting policy to base price floors upon quality of the cane input received by a factory

imperfect competition in agricultural markets and the role of cooperatives a spatial analysis important characteristics of many agricultural markets are costly to transport raw products and relatively few processors one or more of which is often a cooperative this paper analyzes pricing behavior in these oligopsonistic spatial markets and focuses specifically upon the conjecture that cooperatives may have a procompetitive effect on the behavior of rival non co op processors the existence and magnitude of a procompetitive effect is shown to depend upon a number of structural and strategic factors including competitive relations among the non co op processors and a cooperative s membership and pricing policies

imperfect competition functional forms and the size and distribution of research benefits abstract the effects of functional forms for supply and demand on the size and distribution of the returns to research are examined under a range of forms of competition under perfect competition the choice of functional form is relatively unimportant for the estimation of research benefits under imperfect competition the combination of the choice of functional forms for supply and demand and the nature of the research induced supply shift can have profound implications for the results functional form plays a much more important role than in the competitive model the most important contrast is between the constant elasticity model and the linear model along with various cases of a generalized linear model these findings are illustrated using a combination of analytical results and numerical simulations

price behavior in a dynamic oligopsony washington processing potatoes punishment strategies are necessary to sustain a collusive oligopsony in a repeated game context when demand is uncertain and only market variables are observable this article proposes a test for tacit collusion among potato processors in washington state using a dynamic regime switching model estimated with a finite mixture method the results support the existence of punishment and collusive regimes and show the welfare losses due to anti competitive behavior on the part of processors to be significant processors oligopsony power is enhanced by higher domestic production imports and existing stocks but it is ameliorated by high capacity utilization rates and exports copyright 2001 oxford university press

price stability and central bank independence discipline credibility and democratic institutions despite mixed empirical evidence in the past two decades central bank independence cbi has been on the rise under the assumption that it ensures price stability using an encompassing theoretical approach and new yearly data for de jure cbi seventy eight countries 1973 2008 we reexamine this relationship distinguishing the role of printing less money discipline from the public s beliefs about the central bank s likely actions credibility democracies differ from dictatorships in the likelihood of political interference and changes to the law because of the presence of political opposition and the freedom to expose government actions cbi in democracies should be directly reflected in lower money supply growth besides being more disciplinarian it also ensures a more robust money demand by reducing inflation expectations and therefore inflation empirical results are robust and support a discipline effect conditioned by political institutions as well as a credibility effect

explaining government choices for promoting renewable energy abstract many advanced industrialized countries have in recent years experienced a significant expansion of electricity production from renewables yet we know quite little about the dynamics of the underlying policychoices in this area using new data on adoptions and changes in feed in tariff and green certificate schemes in 26 advanced industrialized countries over 20 years we examine both domestic driving forces as well as international determinants the findings suggest that three factors play a particularly important role in pushing countries towards market based support systems characteristics of the existing energy supply system a federalist structure of the political system and eu membership particularly noteworthy is the finding that higher shares of fossil and nuclear energy in the national energy supply as well as higher co 2 intensity of the economy do not as we had expected stand in the way of policies for supporting renewables in electricity production to the contrary they increase the likelihood of a country adopting such policies we also find however that higher economic growth and higher growth in solar and wind energy capacity tend to reduce the political appetite for reforms of existing schemes

process innovation activity in a mixed oligopoly the role of cooperatives this article develops a sequential game theoretic model of heterogeneous producers to examine the market and welfare effects of cooperative involvement in process innovation activity in the agricultural sector the analysis examines an open membership input supplying cooperative co op that maximizes member welfare and finances its innovation activity through retained earnings analytical results show that the presence of the co op can increase the arrival rate of innovations while reducing the price of agricultural inputs cooperative involvement in innovation activity can thus be welfare enhancing and socially desirable with its effectiveness being determined by the degree of producer heterogeneity and the size of innovation costs

variation in central bank independence across countries some provisional empirical evidence in this paper seven hypotheses to explain variation in central bank independence across countries are tested the predictions based upon the theory that delegation of authority by politicians to the central bank is used as a commitment device are not supported central bank independence is not higher the larger the employment motivated inflationary bias the higher political instability or the larger the government debt central bank independence is positively related to historical inflation experience and negatively with political instability we do only find limited support for the view that countries with a universal banking system and countries whose central banks do not regulate financial institutions have more independent central banks

foreign banks and foreign currency lending in emerging europe based on survey data from 193 banks in 20 countries we provide the first bank level analysis of the relationship between bank ownership bank funding and foreign currency fx lending across emerging europe our results contradict the widespread view that foreign banks have been driving fx lending to retail clients as a result of easier access to foreign wholesale funding our cross sectional analysis shows that foreign banks do lend more in fx to corporate clients but not to households moreover we find no evidence that wholesale funding had a strong causal effect on fx lending for either foreign or domestic banks panel estimations show that the foreign acquisition of a domestic bank does lead to faster growth in fx lending to households however this is driven by faster growth in household lending in general not by a shift towards fx lending

the impact of central bank independence on the performance of inflation targeting regimes abstract this paper examines the effects of inflation targeting on inflation in both advanced and emerging economies we do not detect significant effects in advanced economies and only find small benefits in emerging economies in line with previous studies however when we differentiate the impact of inflation targeting based on the degree of central bank independence we find large effects in emerging economies with low central bank independence our results therefore suggest that central bank independence is not a prerequisite for countries to experience significant declines in inflation following the adoption of inflation targeting furthermore we provide evidence that one channel through which inflation targeting lowers inflation more in countries with low central bank independence is the reduction of budget deficits following the adoption of an inflation target

bank funding securitization and loan terms evidence from foreign currency lending we examine how bank funding structure and securitization activities affect the currency denomination of business loans we analyze a unique data set that includes information on the requested and granted loan currency for 99 490 loans granted to 57 464 firms by a bulgarian bank our findings document that foreign currency lending is at least partially driven by bank eagerness to match the currency structure of assets with that of liabilities our results also show that loan currency as well as loan amount and maturity are adjusted to make loans eligible for securitization

the effects of imperfect competition on the size and distribution of research benefits studies of agricultural research benefits usually assume perfectly competitive markets studies that have allowed for market power of agribusiness firms have generally assumed unrealistic pure monopsony or monopoly behavior this paper allows for processing firms to exhibit a range of degrees of oligopsony power in buying raw farm products and oligopoly power in selling processed farm products the results indicate that different types of research induced technical change can exacerbate or ameliorate distortions from the exercise of market power by agribusiness firms which affects the size and especially the distribution of research benefits

market sentiment and macroeconomic fluctuations under pegged exchange rates this paper models changes in market sentiment as a temporary increase in the premium faced by domestic private borrowers on world capital markets the effects of this shock are studied in an intertemporal optimizing framework of a fixed exchange rate economy where firms demand for working capital is financed by bank credit depending on the perceived length of this shock the model is capable of predicting a rise in domestic interest rates capital outflows and a drop in official reserves a reduction in bank deposits and the supply of credit a fall in private consumption a contraction in output and an increase in unemployment these predictions are consistent with observed facts associated with several recent episodes of turbulence on international financial markets

the political economy of monetary institutions in recent decades countries have experimented with a variety of monetary institutions including alternative exchange rate arrangements and different levels of central bank independence political economists have analyzed the choice of these institutions emphasizing their role in resolving both the time inconsistency problem and dilemmas created by an open economy this first generation work however suffers from a central limitation it studies exchange rate regimes and central bank institutions in isolation from one another without investigating how one monetary institution affects the costs and benefits of the other by contrast the contributors to this volume analyze the choice of exchange rate regime and central bank independence together and in so doing present a second generation of research on the determinants of monetary institutions the articles incorporate both economic and political factors in explaining the choice of monetary institutions investigating how political institutions democratic processes political party competition and interest group pressures affect the balance between economic and distributional policy objectives

euroization what factors drive its persistence household data evidence for croatia slovenia and slovakia the question asked in this article is why people continue to use foreign currencies even after their economies have stabilized survey data for croatia slovenia and slovakia are employed to provide an answer the results confirm the role of network effects and of remittances furthermore the extent of currency substitution is found to be positively associated with the level of income and education an important aspect of euroization seems to be age older people are more likely to hold foreign currencies in contrast neither expectations about inflation rates nor about exchange rates do seem to affect the degree of euroization in a systematic and predictable way trust in the banking system is found to affect the choice between foreign currency cash and foreign currency deposits overall the results support the view that the persistence in the use of foreign currencies is driven to a large extent by factors that are related to the past

the political economy of environmental regulation towards a unifying framework there are several theories that attempt to explain various aspects of environmental policy building on insights from this theoretical work and recent advances in our understanding of instrument performance this paper constructs a more complete theory of environmental regulation there are two primary contributions of this research the first is to provide more satisfactory explanations for a number of observed patterns of environmental policy for example there is as yet no satisfactory theory about the emergence of incentive based mechanisms such as marketable permits and effluent fees the second contribution of this paper is to develop a parsimonious framework for understanding many important aspects of environmental policy this framework suggests the outputs of environmental policy emerge from a struggle between key interest groups

domestic and international influences on green taxation economists have made a strong case for the relative efficiency of market based mechanisms for environmental regulation such as cap and trade and green taxes yet the spread of these forms has been limited and traditional command and control regulation still predominates the authors explain geographical and temporal variation in green tax burdens by considering their domestic and international determinants modeling international influences using spatial lags hypotheses are tested using panel data on organisation for economic co operation and development member states from 1995 to 2004 at the domestic level the authors show that green tax burdens are influenced by the left right and environmental positions of legislative medians and the power of the energy producing sector among other factors the authors also show that ideas about policy diffuse through international networks generated by trade and environmental intergovernmental organizations but they do not find compelling evidence for intern

oligopsony power asset specificity and hold up evidence from the broiler industry in this article we look for empirical evidence of hold up in broiler industry production contracts by using the cross sectional national survey of broiler growers first we focus on the problem of under investment and hypothesize that the degree of agent s grower s under investment systematically depends on the principal s integrator s market power and the level of asset specificity second we provide an indirect test of hold up by looking at the grower contract payoffs as a function of the frequency of the housing facilities upgrade requests and the principal s market power the results show moderate empirical support for the presence of hold up

are left wing party strength and corporatism good for the environment evidence from panel analysis of air pollution in oecd countries abstract the effect of left wing party strength and corporatism on air pollution levels in up to 21 oecd countries over the period 1980 or 1990 1999 is tested with both fixed effects and random effects estimators controlling for scale composition technique as well as aggregate time effects robust evidence is found that parliamentary green left libertarian party strength is associated with lower pollution levels the rise of ecologically oriented parties has thus had a real impact on air pollution levels traditional left wing party strength is possibly also associated with lower pollution levels but the evidence is less consistent and robust combined left wing party strength in government is possibly associated with higher pollution levels but this result is also far from robust and is practically small no evidence is found for a consistent systematic impact of corporatism on pollution levels

two fallacies concerning central bank independence this paper takes issue with two basic conclusions prevalent in the literature on central bank behavior first the paper argues that it is inappropriate to presume that central banks will in the absence of any precommitment technology necessarily behave in a discretionary fashion that implies an inflationary bias since there is no functional connection between average rates of money creation or inflation and policy responsiveness to cyclical disturbances it is entirely feasible for the bias to be avoided in other words there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any absolute precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it this abstract was borrowed from another version of this item

analysis of a supply control program under uncertainty and imperfect competition chinese cabbage in taiwan researchers have often attributed the farm wholesale price spread after adjusting for marketing costs as compensation for marketing firms risk bearing however price spreads in excess of marketing costs can also be due to marketing firms exercise of market power in settings where both imperfect competition and marketer risk aversion are plausible a modeling framework must be sufficiently general to accommodate both types of behavior this article develops and estimates such a model in the context of fresh produce marketing and develops the implications for analysis of supply control programs the model is applied to the production and marketing of chinese cabbage in taiwan and specifically to the analysis of supply control programs implemented in this industry by the taiwanese government the empirical results provide little support for the hypothesis that marketing firms exhibit risk averse behavior but they do show that marketing firms exercise oligopsony power in procurement of the product from farmers and that this power is positively related to the quantity supplied in each market period this provides a heretofore unexplored impetus for supply controls intended to raise producer incomes however such controls are also rendered less effective by imperfect competition because marketing firms capture part of the benefits from supply reduction

inflation and central bank independence a meta regression analysis using 59 studies we perform a meta regression analysis of studies examining the relationship between inflation and central bank independence cbi the studies considered are very different with respect to the cbi indicator used the sample of countries and time periods covered model specification estimators used and publication outlet we conclude that there is a significant publication bias however we also find a significant genuine effect of cbi on inflation differences between studies are not caused by differences in cbi indicators used

dollarization of bank deposits causes and consequences abstract this paper assesses the benefits and risks associated with dollarization of bank deposits we provide novel empirical evidence on the determinants of deposit dollarization its role in promoting financial development and on whether dollarization is associated with financial instability we find that a the credibility of macroeconomic policy and the quality of institutions are both key determinants of cross country variations in dollarization b dollarization is likely to promote financial deepening only in a high inflation environment and c financial instability is likely higher in dollarized economies the implications of these findings for financial sector and monetary policies are briefly discussed

financial dollarization and systemic risks new empirical evidence abstract this paper explores the persistence of financial dollarization in a group of 79 economies with different levels of development our main hypothesis is that a high level of domestic debt combined with default risk explains this persistence even after a decline in inflation rates using the generalized method of moments gmm in a panel data analysis our results show that inflation risks caused by increasing probability of default account for financial dollarization more than inflation rate itself after the decrease in inflation rates the foreign currency denominated deposits remain large because of the high debt to gdp ratios particularly in speculative grade economies high public indebtedness leads to expectations of default dollarization is a rational response to the future inflation associated with investors expectations of default observed in highly indebted economies

lessons from the asian crisis abstract this paper provides an asymmetric information analysis of the recent east asian crisis it then outlines several lessons from this crisis first there is a strong rationale for an international lender of last resort second without appropriate conditionality for this lending the moral hazard created by operation of an international lender of last resort can promote financial instability third although capital flows did contribute to the crisis they are a symptom rather than an underlying cause of the crisis suggesting exchange controls are unlikely to be a useful strategy to avoid future crises fourth pegged exchange rate regimes are a dangerous strategy for emerging market countries and make financial crises more likely

reason for reserve reserve requirements and credit this paper considers the impact of a regulatory policy action on bank credit and traces its incidence across banks i make use of a reserve requirement increase in lebanon that was considerably greater on foreign currency deposits than on domestic currency deposits all banks cut lending as they scrambled to adjust portfolios but the policy shock disproportionately affected banks with a greater reliance on dollar funding and with low buffers of dollar liquid assets exposed domestic owned banks also adjusted more slowly than similar foreign owned banks that obtained outside funding descriptive firm bank matching evidence reveals a disproportionate impact on small firms

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

central bank independence and growth a sensitivity analysis in this paper the levine renelt robustness test is employed to examine the robustness of the empirical relationship between growth and various proxies for central bank independence experiments are made with a wide variety of the most comprehensive systematic measures of central bank independence currently available the levine renelt test implies that growth is not robustly correlated with central bank independence

how robust is the relationship between economic freedom and economic growth using various indicators for economic freedom it is shown that increases in economic freedom are robustly related to economic growth this conclusion holds even if the impact of outlying observations is taken into account the level of economic freedom is not related to growth

spatial competition uniform pricing and transportation efficiency in the california processing tomato industry this study examines the role of spatial pricing in the allocation of processing tomatoes from farms to the thirty two processing facilities located in northern and central california a simple theoretical model illustrates that the industry s uniform pricing policy encourages market overlap and excessive transportation costs relative to fob pricing a nonlinear mathematical programming model is developed to determine the optimal allocation of processing tomatoes this allocation is then compared to the estimated actual allocation the analysis reveals foregone profits of only 1 9 from inefficient product allocation simulation results reveal significant competition among processors despite their separation in many cases by long distances

party policy diffusion do parties learn from or emulate parties in other political systems this research develops the argument that parties are more likely to employ the heuristic of learning from and emulating foreign successful incumbent parties spatial econometric analyses of parties election policies from several established democracies robustly confirm that political parties respond to left right policy positions of foreign political parties that have recently governed by showing that parties respond to these foreign incumbent parties this work has significant implications for our understanding of party competition furthermore we contribute to the literature on public policy diffusion as we suggest that political parties are important vehicles through which public policies diffuse

exchange rate regimes for emerging markets moral hazard and international overborrowing this paper investigates the role of the exchange rate regime in a simple fisherian model of the overborrowing syndrome where domestic banks are subject to moral hazard the choice of exchange rate regime may have important implications for the macroeconomic stability of the economy banks that enjoy government guarantees have an incentive to increase foreign borrowing and incur foreign exchange risks that are underwritten by the deposit insurance system in the absence of capital controls this increases the magnitude of overborrowing and leaves the economy both more vulnerable to speculative attack and more exposed to the real economic consequences of such an attack while bad exchange rate pegs will tend to exacerbate the problem of overborrowing in emerging markets it is unclear that flexible exchange rate always dominate fixed exchange rates a good fix one that is credible and close to purchasing power parity may reduce the super risk premium in domestic interest rates and thereby narrow the margin of temptation for banks to overborrow internationally contrary to the current consensus regarding the lessons that should be drawn from the asian crisis a good fix may better stabilise the domestic economy while limiting moral hazard in the banking system

does central bank independence really matter new evidence for developing countries using a new indicator abstract this paper provides a new indicator for central bank independence cbi based on the turnover rate of central bank governors for 82 developing countries over the period 1980 1989 using this new indicator it is concluded that this proxy for cbi is related to inflation only if the high inflation countries are included in the sample the view that both cbi and inflation are caused by effective opposition towards inflation is not supported using both the extreme bound analysis and sala i martin s method we do not find evidence that cbi is robustly related to economic growth

environmental tax reform efficiency and political feasibility although market based environmental measures like uniform co2 taxes reach a given standard at minimal cost they do not prevail in real world policies an effciency oriented environmental policy fails as it involves a redistributen of pollution rights resulting in a strong and generally effective opposition of the groups that forego economic rents the present paper analyzes the tradoff between efficiency and political feasibility of several co2 tax and reimbursement schemes using a computable general equilibrium model of switzerland the simulation results indicate that a policy combining a uniform co2 tax with differentiated labor subsidies preventing intersectoral redistribution is a better solution for the tradeoff than the presently existing tax schemes in various countries

environmental policy convergence the impact of international harmonization transnational communication and regulatory competition in recent years there is growing interest in the study of cross national policy convergence yet we still have a limited understanding of the phenomenon do we observe convergence of policies at all under which conditions can we expect that domestic policies converge or rather develop further apart in this article we address this research deficit from a theoretical perspective we concentrate on the explanatory power of three factors namely international harmonization transnational communication and regulatory competition in empirical terms we analyze if and to what extent we can observe convergence of environmental policies across twenty four industrialized countries between 1970 and 2000 we find an impressive degree of environmental policy convergence between the countries under investigation this development is mainly caused by international harmonization and to a considerable degree also by transnational communication whereas regulatory competition does not seem to play a role

interdependence in comparative politics substance theory empirics substance interdependence is ubiquitous and often central across comparative politics indeed as the authors show first theoretically any situation involving externalities from one unit s actions on others implies interdependence positive or negative externalities induce negative or positive interdependence which spurs competitive races or free riding with corresponding early or late mover advantages and thus strategic rush to act or delay and inaction the authors show next how to model interdependent processes empirically how not doing so risks omitted variable biases favoring domestic and exogenous external accounts over interdependence but how doing so naively risks simultaneity biases with the opposite substantive implications they then discuss how to estimate properly specified interdependence models and finally how to interpret and present estimated spatio temporally dynamic effects response paths and long run steady states with associated standard errors they illustrate by replicating a not

a model of crises in emerging markets this paper presents a perfect foresight model of speculative attacks on emerging markets credit constrained governments are assumed to have two objectives to accumulate liquid assets in order to self insure against shocks to national consumption and to insure poorly regulated domestic financial markets this policy regime generates endogenous fiscal deficits defined to include the growth of contingent liabilities the model sets out a sequence of yield differentials consistent with capital inflows followed by anticipated speculative attacks the model suggests that a common shock generated capital inflows to emerging markets in asia and latin america after 1989

replacing a disobedient central bank governor with a docile one a novel measure of central bank independence and its effect on inflation this paper identifies two mechanisms that empirical papers on central bank independence assume to be embedded in the yardstick measure of turnover rate of central bank governor i the removal of a governor who is perceived as a challenger by the government and ii whether his her replacement is an ally of the government we identify the first mechanism with premature exits of central bankers and the second by examining whether or not the incoming governor is drawn from the ranks of the executive branch of the government we find that only premature exits and replacements with government allies increase inflation

the political economy of pollution taxes in a small open economy abstract this paper develops a positive theory explaining pollution tax policy outcomes in a small open economy the equilibrium tax rate depends on lobby group membership the relative importance of lobbying activities and the tax elasticity of pollution the equilibrium properties are investigated the model is extended to incorporate pollution abatement and a pollution abatement subsidy we show that total pollution may be increasing in the pollution abatement subsidy rate this effect arises because the equilibrium pollution tax rate may be decreasing in the subsidy rate due to altered political influence of the lobby groups in the political equilibrium

charging the earth the promotion of price based measures for pollution control abstract this paper seeks to consider the ways in which the theory and application of economic instruments in particular price based instruments is shaped by the interests values and ideologies of those who are promoting and implementing them although economists have been advocating the use of economic instruments for pollution control for decades it is only in recent years that they have been embraced by business groups and governments looking for a way to avoid stricter and more costly regulations that might inhibit economic growth and as a way of correcting and therefore preserving the free market system this paper examines the rationale for price based instruments and explains how economists have managed to enroll the support of other interest groups even those that have conflicting interests

the dampening effect of bank foreign liabilities on monetary policy revisiting monetary cooperation in east asia abstract this paper addresses the cost of formal monetary cooperation from the perspective of monetary policy effectiveness as banks tend to borrow from abroad in foreign currencies to fund domestic lending monetary policy may have a reduced effect on the credit market and the economy results derived from bank level data in east asia indicate that bank foreign liabilities significantly reduce the effectiveness of the credit channel of monetary policy implying a relatively low cost of giving up monetary autonomy

transitional politics emerging incentive based instruments in environmental regulation abstract this paper proposes a positive theory of environmental instrument choice we study a democratic society that seeks to lower the level of pollution from industrial sources to a pre specified target the target can be implemented by one of three instruments s uniform emission standards p tradeable permits and t emission taxes the conflict of interest between special interests representing polluters and the electorate is resolved by an elected politician we characterize when each of the three policy instruments is chosen in political equilibrium and show that the transition observed in many countries from s to either p or t can be understood as a natural consequence of increasingly ambitious environmental targets

green lobbies and transboundary pollution in large open economies abstract we employ a common agency model of policy making to examine how green lobbies affect the determination of trade and environmental policies in two large countries that are linked by trade flows and transboundary pollution we show that the impact of green lobbying on environmental policy outcomes depends crucially on the prevailing trade regime cooperative or non cooperative on whether environmental agencies act in a unilateral or coordinated manner and on the size of the emission leakages and transboundary spillovers under free trade a unilateral increase in pollution taxes reduces domestic emissions at the cost of increased foreign emissions in this case if the emission leakages and the associated transboundary spillovers are large enough green lobbying can create a bias towards lower pollution taxes

the intergovernmental network of world trade igo connectedness governance and embeddedness membership in certain intergovernmental organizations igos such as the world trade organization has long been argued to stimulate trade yet evidence linking igos to trade is mixed the authors argue that identifying the influence of igos requires attention not only to the institutions igos enact but also to the network through which they enact them this approach allows them to demonstrate that trade between two countries increases by an average of 58 with every doubling of the strength of igo connection between the countries they also contribute to debates regarding the mechanisms through which structural relationships influence economic behavior by showing that substantial trade benefits occur not only through economic igos but also through igos that were formed for social and cultural purposes and that connections through igos that are organizationally strong have more impact than those through minimalist igos

the mirage of exchange rate regimes for emerging market countries this paper argues that much of the debate on choosing an exchange rate regime misses the boat it begins by discussing the standard theory of choice between exchange rate regimes and then explores the weaknesses in this theory especially when it is applied to emerging market economies it then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits the conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal financial and monetary institutions in producing macroeconomic success in emerging market countries this suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable and more on these deeper institutional arrangements a focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years

dollarization exchange rate regimes and government quality abstract the dollarization of the domestic banking system represents a source of vulnerability for emerging market countries and a debate has emerged over whether the exchange rate regime has an impact on dollarization this paper argues that the regime is far less important than the literature has previously claimed unofficial dollarization results from a lack of faith in the domestic currency which ultimately stems from the belief that the government will not follow policies that promote long run currency stability empirical results indicate that improved government quality reduces unofficial dollarization while the exchange rate regime plays no direct role in promoting dollarization

environmental pressure group strength and air pollution an empirical analysis there is an established theoretical and empirical case study literature arguing that environmental pressure groups have a real impact on pollution levels our original contribution to this literature is to provide the first systematic quantitative test of the strength of environmental non governmental organizations engos on air pollution levels we find that engo strength exerts a statistically significant impact on sulfur dioxide smoke and heavy particulates concentration levels in a cross country time series regression analysis this result holds true both for ordinary least squares and random effects estimation it is robust to controlling for the potential endogeneity of engo strength with the help of instrumental variables the effect is also substantively important strengthening engos represents an important strategy by which aid donors foundations international organizations and other stakeholders can try to achieve lower pollution levels around the world

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed