optimal pricing of intraday liquidity abstract this paper presents a general equilibrium model where intraday liquidity is needed because the timing of payments is uncertain a necessary and sufficient condition for an equilibrium to be efficient is that the nominal intraday interest rate be zero even when the overnight rate is strictly positive because a market for liquidity may not achieve efficiency this creates a role for the central bank i allow for the possibility of moral hazard and study policies commonly used by central banks to reduce their exposure to risk i show collateralized lending achieves the efficient allocation while for certain parameters caps cannot prevent moral hazard

policy watch infrastructure investment and economic growth in the late 1980s david aschauer 1989 triggered a long overdue dialogue among economists and political leaders when he published a study arguing that much of the decline in u s productivity that occurred in the 1970s was precipitated by declining rates of public capital investment my own work confirmed these results munnell 1990a spending advocates seized on these findings as support for increased public investment the enthusiasm among policymakers for the early aschauer results was matched if not surpassed by skepticism on the part of many economists critics of these studies charged that the methodology was flawed that the direction of causation between public investment and output growth is unclear and that even if the historical empirical relationships were estimated correctly they provide no clear indications for current policy who s right what do we know and not know about the link between public infrastructure and productivity and what are the implications of these results for policy

international economic structures government interests and international coordination of macroeconomic adjustment policies analysts have commonly argued that there has been a decline in international coordination of the kinds of policies that governments can use to manage the international payments imbalances that emerge when different governments pursue different macroeconomic policies the decline typically has been attributed to a posited decline in american hegemony in contrast this article argues that international coordination of macroeconomic adjustment policies trade and capital controls exchange rate policies balance of payments financing and monetary and fiscal policies was at least as extensive for much of the 1980s as it had been in the 1960s there was however a shift away from coordination of balance of payments financing and other policies that have limited direct consequences for domestic economic and political conditions and a concurrent shift toward coordination of monetary and fiscal policies that are critically important for domestic politics and economics this change is best explained as a consequence of changes in the structure of the international economy most important international capital market integration encouraged governments to coordinate monetary and fiscal policies because balance of payments financing and exchange rate coordination alone are insufficient to manage the enormous payments imbalances that emerge when capital is able to flow internationally in search of higher interest rates and appreciating currencies

credible commitment and success with public enterprise reform abstract this paper studies why some efforts at public enterprise reform fail and why others succeed economic reforms are intended to increase efficiency and thus help sustain long term growth yet many governments have had difficulty sustaining the reforms they initiated and have reintroduced rigid controls over markets and enterprises this is because either in the process of implementation the government discovers that the costs of carrying the reform further are greater than the expected efficiency gains or the public is skeptical that the new policies can be sustained and does not take the actions necessary for the gains to be realized this paper develops a new institutionalist framework and employs various measures of policy commitment and net gain from continued reform to analyze these issues the paper suggests ways in which the potential success or failure of a reform can be assessed with implications for the steps that reformers might take to increase the chances of success

the big push natural resource booms and growth a simple application of big push reasoning suggests that natural resource booms can be important catalysts for development in poorer countries in this paper we present evidence from seven latin american countries that natural resource booms are sometimes accompa nied by declining per capita gdp we present a model with natural resources increasing returns in the spirit of big push models and expectations to clarify some of the reasons this may happen q 1999 elsevier science b v all rights reserved

the new industrial relations british electricians new style agreements this study analyzes the response of the british electricians union to economic adversity and to new managerial strategies as embodied in the union s novel agreements in three japanese owned british electronics firms these agreements provide that the union is the sole bargaining representative in each firm most british plants by contrast have multiple union representation most of the new style agreements also contain a no strike clause final offer arbitration of interest disputes and measures to increase labor flexibility reduce the diversity in conditions among plant office and managerial employees and enhance employee participation in major company decisions the author views these agreements as evidence that fundamental changes in collective bargaining relationships are taking place

politics and markets dual transformations the articles published in this issue of the journal help advance the debate on market reform in former socialist states in our comment besides dealing with data analysis issues we suggest several ways to improve the level of debate about substantive issues these suggestions include more attention to politics including path dependence and more attention to middle level generalizations from other developing market societies

the imf a bird s eye view of its role and operations the international monetary fund imf is the world s premier international financial institution with 184 member countries and active programmes in a significant number of them at any one time the fund attracts a great deal of attention much of it critical but the discussion is often polemic in style strongly held but frequently opposing views are expressed this survey attempts to examine in an objective way the theory and evidence relating to the fund s operations many aspects of the empirical research are relatively recent and a universal consensus is yet to emerge as a consequence there is scope for disagreement to persist however the research is also gradually clarifying many important issues the format for the survey is to examine the life cycle of imf arrangements what makes a country turn to the fund for assistance should the imf be lending what influences the outcome of negotiations and the design of programmes are imf programmes effective and why do some countries make prolonged use of imf resources for completeness there is also some discussion of the history of the imf the extent to which fund policies have been influenced by advances in economic theory and the fund s systemic role important organisational and governance issues are also covered briefly although primarily adopting an economist s perspective the survey reflects the growing recognition that in order to understand the imf s operations economics has to be combined with politics examining the imf is an exercise in applied political economy copyright 2007 the author journal compilation 2007 blackwell publishing ltd

world bank directives domestic interests and the politics of human capital investment in latin america recent studies underscore the importance of international organizations in transmitting norms ideas and values to developing countries but has this diffusion influenced government policy in less developed countries during the past two decades the world bank has emphasized the need for third world governments to increase the stock of human capital by investing in education and health specifically it has encouraged developing countries to shift an increasing share of their resources toward primary education the authors examine 13 latin american countries between 1980 and 1992 to establish the relationship between world bank project lending and government investment in human capital they combine time series cross sectional analysis with field research to evaluate the world bank s influence on government spending on education and health although the world bank may be successful in convincing developing country technocrats to invest in people this research suggests that it is less successful in co

democracy and social spending in latin america 1980 92 what is the effect of regime type on public expenditures for social programs we investigate the relationship between democracy and the change in social spending controlling for gdp the debt inflation and age structure of the population through a time series cross sectional panel data set for 17 latin american countries from 1980 to 1992 the results show that especially in poor countries during economic crisis democracies increase the allocation of resources to social programs relative to authoritarian regimes this suggests that the latter are more constrained by economic forces whereas democracies are more constrained by popular demands hence calls to abandon broad categorizations of regime type appear to be premature democracy can matter in systematic and substantial ways

privatization and democracy the effects of regime type in the developing world what is the effect of regime type on privatization of state owned enterprises the authors investigate the relationship between regime type and privatization through a panel data set for 76 developing countries from 1987 to 1994 the results show that contrary to most studies that claim that authoritarian regimes are better able to ignore societal interests opposed to economic measures that impose austerity democracies privatize more than authoritarian regimes moreover challenging conventional interpretations that claim that economic difficulties contribute to state sell offs the authors find that privatization is most likely in wealthier developing democracies whose budgets operate with current account surpluses hence authoritarian regimes provide neither the right nor the correct model for countries wishing to pursue unpopular economic policies

seasonal solow residuals and christmas a case for labor hoarding and increasing returns in aggregate unadjusted data measured solow residuals exhibit large seasonal variations total factor productivity grows rapidly in the fourth quarter at an annual rate of 16 percent and regresses sharply in the first quarter at an annual rate of 24 percent how much of the total seasonal variation in the measured solow residual can be explained by christmas the answer to this question is surprising with increasing returns and time varying labor effort christmas is sufficient to explain the seasonal variation in the solow residual consumption average productivity and output in all four quarters our analysis of seasonally unadjusted data uncovers important roles for labor hoarding and increasing returns that are difficult to identify in adjusted data prescott 1986 has argued that the variability of solow s residual is a reasonable estimate of the variability of exogenous technology shocks when solow s residual is measured using seasonally unadjusted data for the postwar u s economy it exhibits large seasonal variations growing rapidly in the fourth quarter at an annual rate of 16 percent and falling sharply in the first quarter at an annual rate of 24 percent this paper starts from the premise that it is implausible to attribute seasonal variation of this magnitude to changes in the state of technology we present a model in which all seasonal fluctuations arise from a single demand shift christmas this demand shift together with misspecification of the traditional production function leads to large seasonal variation in the solow residual we consider two candidates for misspecification labor hoarding and external increasing returns to scale even when technological growth is aseasonal either candidate in isolation can induce spurious seasonality in the solow residual our general equilibrium analysis indicates that 1 the economy s seasonal patterns in all four quarters may be a response simply to a fourth quarter consumption demand shift and 2 a combination of labor hoarding and external increasing returns is important for replicating these patterns in aggregate quantity variables for the postwar u s economy since our analysis identifies important roles for labor hoarding and increasing returns these results have implications for nonseasonal macroeconomic models indeed our analysis im

bureaucrats in business chinese style the lessons of market reform and state entrepreneurialism in the people s republic of china in the 1990s parts of the state bureaucracy in china have been setting up new profit seeking risk taking businesses some of these businesses are entrepreneurial rather than rent seeking and are an unplanned and unanticipated development in china s market oriented economic reforms what are the lessons of this phenomenon for the developing world state entrepreneurialism may create problems such as reduced government control over departmental finance loss of state assets and uneven provision of services it is nevertheless an innovative solution to the politically difficult problem of bureaucratic restructuring and confounds the development orthodoxy fostered by neoliberalism that states will resist market reform it also demonstrates that to understand fully the politics of market reform we must research the activities of subcentral state bureaucrats as well as central leaders and policymakers

crisis in the eye of the beholder economic crisis and partisan politics in latin american and east european international monetary fund programs this article analyzes the interaction between economic crises and partisan politics during international monetary fund program initiation in latin america in the 1980s and eastern europe in the 1990s the author argues that economic crises are at least in part in the eye of the beholder and therefore policy responses reflect the interaction between crisis intensity and the government s partisan interpretation of the crisis which in turn depends on the nature of the economic crisis and its broader regional and international environment using cross country statistical evidence from the two regions the article shows that certain types of crises such as liquidity shortfalls elicit similar responses across the ideological spectrum and regional contexts by contrast debt repayment and domestic crises are more prone to divergent ideological interpretations but the extent of partisan divergence is context sensitive in that it occurred during the latin american debt crisis but not in the post communist tra

banking crises and liquidity in a monetary economy abstract this study investigates banks liquidity provision using the lagos and wright model of monetary exchange with aggregate uncertainty we show that banks sometimes exhaust their cash reserves and fail to satisfy their depositors needs for consumption smoothing we also show that banking crises can be eliminated by a rate of return equalizing policy under perfect risk sharing but the first best outcome can be only achieved with the friedman rule these results cannot be obtained with other monetary models e g overlapping generations models we also derive a rich array of non trivial effects of inflation on equilibrium deposits the probability of banking crises and banks portfolios

neopatrimonialism and the political economy of economic performance in africa critical reflections during the past two decades neopatrimonialism has become the convenient all purpose and ubiquitous moniker for african governance the school of thought behind this research program which the author refers to as the neopatrimonialism school has produced an impressive literature on africa its analysis informs policymakers and its language permeates media reportage on african states while neopatrimonialism has long been a focus of development studies in recent times it has assumed politically and economically exigent status the school identifies causal links between neopatrimonialism and economic performance and makes predictions drawing from what is referred to as the logic of neopatrimonialism neopatrimonialism is said to account for trade policies hyperinflation economic stagnation low investment in infrastructure urban bias andultimately the lack of economic development in africa this article examines the empirical basis of predictions and policy prescriptions it argues that while descriptive of the social practices of the states and individuals that occupy different positions within african societies the concept of neopatrimonialism has little analytical content and no predictive value with respect to economic policy and performance

market reforms technocrats and institutional innovation abstract successful market reform projects require significant revision of government agencies institutional arrangements and policy making procedures in part to provide reformers autonomy from countervailing pressures this paper examines how such innovations facilitated reforms in mexico and argentina it finds executive leadership helped facilitate institutional change but that technocrat policymakers played more crucial roles than previously documented through rule changing instrument creating and strategizing behaviors they helped engineer their own autonomy and gained control of the policy agenda by changing the organization of decision making and the position they occupied in the bureaucracy these findings hold across distinct policy arenas and political systems

adjustment to stagflation and neoliberal reforms in japan the united kingdom and the united states the implications of the japanese case for a comparative analysis of party competition this article explains why the stagflation and neoliberal reforms that reinforced party polarization in the united kingdom and the united states instead led to party convergence in japan in japan industry centered adjustment and bureaucratic coordination distributed the costs of policy changes across societal groups and facilitated party convergence whereas the lack of such societal and state institutions in the united kingdom and the united states led to policy changes with polarizing consequences focusing on industry centered adjustment brings the unions back into japanese politics and provides an alternative to the pluralism neocorporatism dichotomy of organizing societal interests bureaucratic coordination not only includes the opposition in the framework but also provides a more nuanced view than is assumed in the debate over whether the ruling party of the bureaucracy dominates the japanese state when combined these conceptualizations of market and state go a long way toward explaining the dyn

architecture of equity markets the abidjan regional bourse literature on financial market liberalization focuses heavily on state activity in allocating preferential credit i consider state activity in promoting nascent equity markets by asking why a state would create and promote a market in which the transaction costs are high the potential rate of return is low and firms are reluctant to list shares i examine the case of the west african regional stock exchange and propose that the central bank for the west african monetary union created it to mediate the relationship between this region and the world economy i propose that states and domestic markets act as complements rather than as rivals in some instances of bourse creation moreover bourses in developing economies present a different set of relationships among states public and private lending authorities and market participants than their counterparts in more developed financial environments this illuminates a need for further research in this area

who recovers first banking crises resolution in developing countries this article evaluates conditions that facilitate banking crises resolution using data from 67 developing countries from 1980 to 1995 in particular the author examines explanatory variables under three categories external macroeconomic constraints the role of the international monetary fund imf and domestic political conditions the principal results of the analyses are twofold first imf credits decrease the probability of resolving banking crises this result holds controlling for potentially confounding variables and in a test for endogeneity second the decisiveness of a political regime significantly influences the probability of emerging from systemic distress specifically in cases of moderate banking distress decisiveness facilitates resolution of crisis but during periods of severe crises less decisive governments i e governments constrained by accountability groups are likely to recover more quickly than are those with less constrained executives

the paradox of state retrenchment in sub saharan africa the micro level experience of public social service provision summary over the past 30 years in africa neoliberal economic reform has meant a major retrenchment of the state provision of health and education with paradoxical local effects based on an analysis of 2005 afrobarometer data the study finds that the rural poor are more likely to use public schools and clinics than the urban better off the data suggest that a two tiered social service system now exists across many african countries where the rural poor may have little choice but to use public social services while the urban better off choose to pay for private alternatives the author argues that concerns about ensuring absolute levels of access have obscured attention to the micro experience and quality of social service delivery

bourgeois revolutions the policy consequences of resurgent conservatism much of the literature on reform politics has focused on social democratic governments this article reexamines the dynamics of reform by concentrating on conservative governments in four advanced

the comparative politics of labor initiated reforms swedish cases of success and failure this article explores the reasons why some reform initiatives launched by the swedish labor movement have succeeded and others have failed it presents four case studies two success stories the pension reform of 1959 and the industrial democracy reforms of the 1970s and two failures inheritance taxation in the 1920s and 1940s and wage earner funds in the 1970s the article casts these case studies in an analytical framework that emphasizes three variables to the extent that they challenge the interests of capital labor s reform initiatives are likely to precipitate a powerful countermobilization but the politics of reformism are also shaped by the extent to which labor s initiatives embody a universalistic conception of social justice and or appeal to the material interests of swing voters

recursos naturales diversificacion y crecimiento regional en el peru based upon the export product space this paper shows the main features of the export product composition of peru and its regions with respect to export baskets these include a high con centration in few commodities a relatively low degree of similarity between products relatively high levels of productivity at the international level and enormous undiscovered or untapped export potential in addition this paper analyzes the hypothesis that the natural resource curse affects regional growth employment and export diversification subject to the limitations of the data and the heterogeneous panel methods employed estimation results indicate that the share of natural capital out of the total tangible wealth and natural capital per capita seems on average and in a relatively statistically robust way to spur growth primary employment and export concentration in a few products consequently the natural resource curse for the peruvian regions is not about growth but about low regional development since such resources do not have a significant impact on secondary and tertiary employment or on export product diversification

the real bills doctrine versus the quantity theory a reconsideration two competing monetary policy prescriptions are analyzed within the context of overlapping generations models the real bills prescription is for unfettered private intermediation or central bank operations designed to produce the effects of such intermediation the quantity theory prescription in contrast is for restrictions on private intermediation designed to separate money from credit although our models are consistent with quantity theory predictions about money supply and price level behavior under these two policy prescriptions the models imply that the quantity theory prescription is not pareto optimal and the real bills prescription is

the perils of polarization economic performance in the postcommunist world perhaps the most striking feature of the postcommunist transformation is the tremendous variation in rates of economic growth across countries to account for these differences this article develops an alternative to the j curve and partial reform views that currently dominate discussions of the politics of economic reform this approach treats economic performance as a political struggle between ex communist and anticommunist factions engaged in a war of attrition over economic and political resources using a pooled time series analysis of economic growth across twenty five postcommunist countries for the period 1990 98 it finds that political polarization between ex communist and anticommunist factions has had a devastating effect on economic growth where these competing factions have had roughly equal power and have struggled over the economic rules of the game as in bulgaria or ukraine economic growth has been slow in contrast where either ex communist or anticommunist factions have dominated the political scene as in estonia or uzbekistan economic performance has been much better in addition economic growth has followed the electoral calendar in polarized countries as elections approach and the odds of a change in economic policy increase growth rates have plummeted in polarized countries these findings have implications for studies of the postcommunist transformation the political business cycle and the politics of economic reform more generally

after neoliberalism the politics of reregulation in mexico neoliberal economic reforms rather than unleashing market forces can result in new institutions for market governance by vacating institutionalized policy domains neoliberal reforms can trigger two step reregulation processes as first political entrepreneurs launch projects to build support coalitions by reregulating markets and second societal groups respond to these projects by mobilizing to influence the terms of reregulation depending on the strengths and strategies of politicians and societal groups reregulation processes result in varied institutions for market governance the article develops this argument by analyzing how neoliberal reforms in mexico led to the construction of distinct institutions for market governance across four states chiapas guerrero oaxaca and puebla the findings from mexico highlight the importance of moving beyond the questions of why developing countries choose neoliberal policies and how they implement them students of the political economy of development should shift their attention instead to understanding the kinds of new institutions that replace those destroyed or displaced by neoliberal reforms

small states in big trouble state reorganization in australia denmark new zealand and sweden in the 1980s in australia denmark new zealand and sweden in the 1980s coalitions of politicians fiscal bureaucrats and capital and labor in sectors exposed to international competition allied to transform the largest single nontradables sector in their society the state particularly the welfare state they exposed state personnel and agencies to market pressures and competition to reduce the cost of welfare and other state services the impetus for change came from rising foreign public and private debt rising public debt levels and expensive welfare states interacted to create a tax wedge between employers wage costs and workers received wages this undercut international competitiveness worsening current account deficits and leading to more foreign debt accumulation two factors explain variation in the degree of reorganization in each country differences in their electoral and constitutional regimes and the willingness of left parties to risk splitting their core constituencies introduction of market pressures is an effort to go beyond the liberalization of the economy common in industrial countries during the 1980s and both to institutionalize limits to welfare spending and to change the nature of statesociety relations away from corporatist forms of interest intermediation in short not just less state but a different state

currency elasticity and banking panics theory and evidence existing models of banking panics contain no role for monetary factors and fail to explain why some banking systems experienced panics while others did not a monetary model is constructed where seasonal variations in the demand for liquidity and credit play a critical role in generating banking panics these panics occur when there are restrictions on the issue of currency in private banks but they do not occur if banks are unrestricted empirical evidence from canada and the united states for the period 1880 1910 is largely consistent with the predictions of the model

economic organization with limited communication this paper presents formal stylized representations of communication accounting systems oral assignment portable object written message and telecommunication systems are considered the environments that allow this formalization are characterized by spatial separation private information and a need to keep track of past actions transfers and shocks in environments that have spatial separation and private information beneficial multilateral arrangements can depend critically on agents ability to communicate to one another values of contemporary shocks and to keep track of histories of past transfers or past announced shocks this paper formalizes this idea and focuses on com

bank suspension of convertibility abstract a banking panic occurs when depositors at all banks seek a large reduction in their deposit holdings suspension of convertibility of demand deposits into currency was the banking system s response to a banking panic when depositors are incompletely informed about the state of bank investments a panic can occur when depositors expect capital losses conditional on having observed noisy indicators of the state of bank investments banks with superior information about the investments can signal to depositors by suspending convertibility that continuation of the long term investments is mutually beneficial

economic reform and political change in myanmar burma abstract this paper examines recent policy changes in myanmar formerly burma analyzing the reasons for the decision to move from a state led socialist planning system to a more market oriented system and attempting to evaluate both the direction and sustainability of these economic reforms on the basis of this survey of recent economic development the paper seeks to evaluate the argument that economic reform is a hostage to political reform the discussion of the relationship between economic change and political reform has suffered from drastic oversimplification and rests on misleading assumptions about causal relationships between economic and political factors the paper argues that a less superficial account must embrace an understanding of the historical roots of the burmese political economy the history and nature of the burmese state and the characteristics of burmese military and political elites we conclude that it is more illuminating to focus on the historical interaction of economic and political factors so as to construct a convincing political economy of myanmar than to argue for the current significance of political conditionality

monetary growth in a turnpike environment abstract a general equilibrium model of monetary growth in a turnpike economy is constructed it is shown that money lifts the economy up to a pareto superior growth path by eliminating the investment in projects with low returns the growth rate of the monetary economy is larger than that of the nonmonetary economy and mckinnon s complementarity hypothesis holds provided that the agents degree of relative risk aversion is not too large the main theorem states a sufficient condition for the existence of a monetary equilibrium with a constant rate of return on money

money banking and capital formation we consider a monetary growth model in which banks arise to provide liquidity in addition there is a government that issues not only money but interest bearing bonds these bonds compete with capital in private portfolios when the government fixes a constant growth rate for the money stock we show that there can exist multiple nontrivial monetary steady states one of these steady states is a saddle while the other can be a sink moreover paths approaching a steady state can display damped endogenous fluctuations and development trap phenomena are common across different steady states low capital stocks are associated with high nominal interest rates the latter signal the comparative inefficiency of the financial system also increases in the steady state inflation rate can easily reduce the steady state capital stock journal of economic literatureclassification numbers e13 e44 e50 g20 o16

economic crisis and policy choice the politics of adjustment in the third world the acute economic pressures of the 1980s have forced virtually all of latin america and africa and some countries in asia into painful austerity programs and difficult economic reforms scholars have intensively analyzed the economics of this situation but they have given much less attention to the political forces involved in this volume a number of eminent contributors analyze the politics of adjustment in thirteen countries and nineteen governments drawing comparisons not only across the full set of cases but also within clusters selected to clarify specific issues why do some governments respond promptly to signs of economic trouble while others muddle indecisively for years why do some confine their response to temporary macroeconomic measures while others adopt broader even sweeping programs of reform what leads some countries to experiment with heterodox approaches while most however reluctantly pursue orthodox courses why confronted with intense political protest have some governments persisted while others have altered or abandoned course the answers to these questions are political not economic and they are examined here by thomas m callaghy stephan haggard miles kahler robert r kauman joan m nelson and barbara stallings

the politics of structural change swedish social democracy and thatcherism in comparative perspective the 1930s and the 1980s were decades of significant political economic change in the capitalist democracies depression and the rise of the industrial working class created opportunities for the establishment of social democracy in the 1930s stagflation and the decline of the working class made possible waves of radical rightist reform however this article suggests that only governments that do not have to concentrate myopically on the exigencies of winning the next election have the political space to undertake structural changes the benefits of which may only be manifest in the medium term in turn successful reforms are likely to entail changes in underlying social structural conditions such as the strengthening or weakening of organized labor movements that both expand the electoral constituencies of the government s partisanpreferred policies and improve their macroeconomic efficacy these propositions are examined with respect to the construction social democracy in sweden in the 1930s and the

stages of diversification this paper studies the evolution of sectoral concentration in relation to the level of per capita income we show that various measures of sectoral concentration follow a u shaped pattern across a wide variety of data sources countries first diversify in the sense that economic activity is spread more equally across sectors but there exists relatively late in the development process a point at which they start specializing again we discuss this finding in light of existing theories of trade and growth which generally predict a monotonic relationship between income and diversification

growth in global materials use gdp and population during the 20th century the growing industrial metabolism is a major driver of global environmental change we present an assessment of the global use of materials since the beginning of the 20th century based on the conceptual and methodological principles of material flow accounting mfa on the grounds of published statistical data data compilations and estimation procedures for material flows not covered by international statistical sources we compiled a quantitative estimate of annual global extraction of biomass fossil energy carriers metal ores industrial minerals and construction minerals for the period 1900 to 2005 this period covers important phases of global industrialisation and economic growth the paper analyses the observed changes in the overall size and composition of global material flows in relation to the global economy population growth and primary energy consumption we show that during the last century global materials use increased 8 fold humanity currently uses almost 60 billion tons gt of materials per year in particular the period after wwii was characterized by rapid physical growth driven by both population and economic growth within this period there was a shift from the dominance of renewable biomass towards mineral materials materials use increased at a slower pace than the global economy but faster than world population as a consequence material intensity i e the amount of materials required per unit of gdp declined while materials use per capita doubled from 4 6 to 10 3 t cap yr the main material groups show different trajectories while biomass use hardly keeps up with population growth the mineral fractions grow at a rapid pace we show that increases in material productivity are mostly due to the slow growth of biomass use while they are much less pronounced for the mineral fractions so far there is no evidence that growth of global materials use is slowing down or might eventually decline and our results indicate that an increase in material productivity is a general feature of economic development

monetary policy banking crises and the friedman rule banking crises are frequent events gerard caprio and daniela klingebiel 1997 catalog over 80 banking crises during the last 25 years interestingly some banking crises are associated with no output losses whatsoever while others involve massive recessions finally it is known that the probability of a banking crisis rises as the rate of inflation rises see asli demirguc kunt and enrica detragiache 1997 john boyd et al 2001a b while received wisdom exists about the conduct of monetary policy while a crisis is underway there is no formal treatment of how the conduct of monetary policy during normal times affects the potential for banking crises to occur to fill that gap i consider economies where spatial separation and limited communication create a transactions role for money and random shocks to agents liquidity preferences create a role for banks in addition banks confront randomness in withdrawal demand when withdrawal demand is sufficiently high banks exhaust their cash reserves there are good reasons to associate this with a banking panic the output lost during a banking panic depends on how great withdrawal demand is some banking crises generate no output losses while others generate large reductions in resource availability in addition the conduct of monetary policy during normal times affects the probability of a banking crisis the higher the nominal interest rate the inflation rate the higher is the probability of a panic driving the nominal interest rate to zero following the friedman rule eliminates bank panics this constitutes a new rationale for the friedman rule nonetheless conventional methods of implementing the friedman rule never produce an optimal resource allocation in particular low nominal interest rates induce banks to hold large cash reserves thereby forgoing socially more productive investments in effect the friedman rule induces banks to become narrow banks voluntarily the banking system is very safe but it undertakes a suboptimal level of investment less conventional methods for implementing the friedman rule such as allowing unrestricted access to the discount window at a zero nominal interest rate lead either to the nonexistence of equilibrium or to massive indeterminacies none of the equilibria will be consistent with full optimality

public opinion and market reforms the limits of economic voting the broadly held view that promarket reforms are good for most people is in conflict with the equally broadly held view that in democracies reforms will generate widespread resistance resistance is expected because reforms typically produce economic downturns at least over the short term under normal circumstances we expect citizens to withdraw support from governments during periods of economic decline if citizens withdraw support then governments worried about the next election may abandon reforms but our expectations should be different of new democracies pursuing promarket reforms citizens may believe governments when they claim that things have to get worse before they get better or that economic stagnation is the fault of the past model research in poland peru and mexico reported in this special issue supports these expectations hence under democracy there is more scope for support of painful reforms than frequently acknowledged

international negotiations in the shadow of national elections this study examines the role elections play in negotiations between states and the international monetary fund imf although loans made by the imf often require countries to introduce painful austerity measures that provoke a backlash from angry citizens some governments are able to negotiate more favorable terms than others original data on the substantive content of imf loans show that governments leverage imminent elections to obtain more lenient loan terms conditions that require labor market reforms in exchange for imf financing are relatively less stringent in loans negotiated within six months before a pending democratic election all else equal the further away elections are from loan negotiations the more stringent the labor conditions included in countries loan programs elections give governments leverage in their international negotiations and this leverage is effective even when states negotiate with unelected bureaucrats during times of economic crisis

the role of demandable debt in structuring optimal banking arrangements demandable debt finance by banks warrants explanation because it entails costs of bank suspension liquidation and idle reserve holdings an explanation is developed in which demandable debt provides incentive compatible intermediation where the banker has comparative advantage in allocating investment funds but may act against the interests of uninformed depositors demandable debt attracts funds by giving depositors an option to force liquidation its usefulness in transacting follows from information sharing between monitors and nonmonitors copyright 1991 by american economic association

export specialisation and local economic growth this paper aims to provide empirical evidence on whether export specialization or diversification is better for local economic growth using export data from 354 magisterial districts of south africa for 1996 and 2001 we estimate spatial growth regressions that include measures of the degree of export specialization and diversification overall exporting regions outperform other less or non exporting regions also we find that export specialisation rather than export diversification has been associated with local economic growth with specialization in mining and agriculture being especially beneficial our results support the view that specialization in a locality s area of comparative advantage is good for local economic development we also find that localities with higher initial levels of human capital and higher subsequent population growth performed better this is consistent with the belief that policies aimed at strengthening human capital and improving agglomeration economies will enhance local economic development

timing is everything elections and trade liberalization in the postcommunist world in the wake of the soviet bloc s collapse various postcommunist countries rushed to gain greater access to foreign markets many of them have made substantial progress in liberalizing commerce but the movement toward free trade has been by no means universal one prominent view is that the establishment of democratic institutions has stimulated economic reform in thepostcommunist world the authors conduct one of the first studies on this topic and find that democracies are indeed more likely to liberalize trade than nondemocracies they also find that the electoral calendar has a potent influence on the timing of commercial reform in postcommunist democracies controlling for a range of factors politicians are most likely to reduce trade barriers immediately after voters go to the polls trade liberalization is much less likely to occur at other points in a democracy s electoral calendar and elections have no effect on commercial reform in nondemocracies

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

seasonal cycles business cycles and monetary policy abstract this paper presents a dynamic general equilibrium model that is consistent with both seasonal and business cycle facts in the u s economy the model features consumption durability and a transaction technology both crucial in accounting for seasonal patterns of nominal variables a calibrated version of the model is used to quantitatively evaluate welfare consequences of three alternative monetary policy rules 1 the fed s historical policy that smooths nominal interest rates at the seasonal frequency but not at the business cycle frequency 2 a constant money growth rule and 3 a constant interest rate rule we find that the historical policy is associated with higher welfare than both alternatives

beyond the policy frontier canada mexico and the ideological origins of nafta why are certain foreign policy options considered taboo or simply kept off the agenda as necessarily unthinkable or self destructive and under what conditions can governments transcend such policy frontiers this article seeks to answer these questions by examining the circumstances that brought about canada s and mexico s entry into the north american free trade agreement nafta a move that constituted a surprising reversal of historic prohibitions on formalizing bilateral economic integration that had long been entrenched in these two nations foreign policies policy frontiers develop as certain elements of the national interest sovereignty security and identity become equated with the legitimation of state elites when these leaders defend the policy frontier ostensibly to defend the nation they are also defending their own political power these barriers are constructed in a path dependent fashion through a critical juncture that first establishes the frontier and then are maintained over time by institutional and ideological mechanisms of reproduction for the frontier to be transcended a critical juncture combining an exogenous shock with an internal legitimacy crisis must undermine and then reconfigure both mechanisms of reproduction the origins of nafta in the canadian and mexican embrace of the once forbidden bilateral free trade option in 1985 and 1990 respectively illustrate this dynamic while the individual cases offer variations on the policy frontier model that can provide insights into the analysis of other cases of historically resisted foreign policy change

information systems in treaty regimes one of the most influential arguments in international relations is that international institutions influence states behavior by monitoring their compliance with treaties which in turn facilitates reciprocity empirically however many treaty organizations are not mandated to monitor compliance the article develops a parsimonious theoretical framework to address the empirical diversity of monitoring arrangements by mapping strategic environments onto monitoring arrangements it accounts for who detects noncompliance and who brings it to light in particular two factors the interest alignment between noncompliance victims and their states and the availability of noncompliance victims as low cost monitors largely shape the organizational forms of information systems this simple theory sheds light on a wide range of substantively important treaty regimes

sustaining economic reform under political liberalization in africa issues and implications abstract structural adjustment programs in sub saharan africa have resulted in only partial economic successes but have played a significant role in facilitating political liberalization economic reforms can be deepened however if policies which sustain economic and political reform efforts are more explicitly linked the gains to be reaped from economic reforms will only be fully realized in conjunction with improvements in governance and expansion of democratic representation in particular there are four key dimensions for facilitating the sustainability of economic reform in the context of political liberalization in sub saharan africa changing government behavior and strengthening government capacity enhancing the political capacity for effective policy implementation nurturing civil society and increasing nongovernment organization ngo participation and fostering the necessary institutional foundations for markets

economic reform and political transition in africa the quest for a politics of development the 1980s were bracketed by crises in africa as protracted economic malaise was succeeded by a wave of political reform analysts have sought to understand the sources of economic decline as well as the political requisites for recovery in the region neoclassical and structuralist analyses have been challenged by state centric views of economic change the latter perspective emphasizes the need for capable developmental states as a basis for long term adjustment but a political theory of economic change is still lacking such a theory must address the institutional foundations of growth as well as the shifting basis of social coalitions in african regimes political liberalization suggests the possibility of a new setting for economic reform though the effects of political reform on institutions and coalitions remain ambiguous and democratization cannot be regarded as a panacea for the region s developmental failure future research must look more closely at the interests and structures in transitional regimes and scholars should adopt a more comparative vantage on africa s challenges of reform

limiting the unintended consequences of institutional change students of institutional change pay insufficient attention to the conditions under which institutional reform produces unintended procedural and policy consequences the authors contend that the b

crisis politics in europe why austerity is easier to implement in some countries than in others when countries face balance of payments crises their policy responses vary widely this article argues that the choice between the two main options of internal adjustment i e austerity and stru

the institutional environment for infrastructure investment the empirical evidence that links political institutions to economic outcomes has grown dramatically in recent years however virtually all of this analysis is undertaken using data from the past three decades this paper extends this empirical framework by performing a two century long historical analysis of the determinants of infrastructure investment in a panel of over 100 countries the results demonstrate that political environments that limit the feasibility of policy change are an important determinant of investment in infrastructure copyright 2002 oxford university press

energy shocks crises and the policy process a review of theory and application what motivates changes in energy policy typically the process begins with a notable exogenous event a shock often the shock leads to what is perceived to be a crisis this review essay surveys theories of crisis policymaking from the social science literature and considers their application to changes in energy policy two cases one from the u s the other from germany are examined in more detail from the standpoint of the theories discussed suggestions are made for improving energy policy analysis in the future

the seasonality of banking failures during the late national banking era in this paper we expand previous models with banks and money and explore the consequences of seasonals in the banking system we find that when bank failures occur not all of them have associated large output losses and currency premiums exist we show that the most important sources of seasonal fluctuations for the banking system are those related to the return on farming activities and the scrapping value of the initial investment finally this model is consistent with the notion that the treasury is more likely to accommodate the money market in periods where the liquidity needs

economic reform in developing countries some conceptual issues abstract this paper is an effort to show that the outcome of stabilization and structural adjustment policies largely based on the neoclassical economic rationale was justifiable neither in terms of the analytical nor the historical literature the very ideological nature and the inherent contradictions of policies inhibited successful implementation and accentuated poverty and inequity in developing countries by drawing on the views of various contemporary schools of economic thought the paper also questions the validity of the international financial institutions claims of consensus on development policy the paper emphasizes that in social science research and more so in policy prescriptions the search for consensus may in fact be futile

fiscal consolidation and financial reforms we use a rare events logistic regression model as well as traditional probit and logit models to investigate the impact of fiscal consolidation on the likelihood of financial reforms for a panel of 17 countries over the period 1980 2005 we show that large austerity plans mainly implemented through spending cuts rather than tax hikes promote financial reforms by considering reforms affecting specific areas of the financial sector we find that the banking sector reforms and domestic finance reforms are more likely to occur when fiscal adjustments are put in place interestingly while banking sector reforms are mainly prompted during periods of tax driven consolidations spending cuts driven consolidation packages seem to propel the implementation of domestic finance reforms finally we show that higher inflation lower degree of trade openness a deterioration of financial conditions and to some extent a fall in the degree of competitiveness enhance the probability of financial reforms

equilibrium bank runs we analyze a banking system in which the class of feasible deposit contracts or mechanisms is broad the mechanisms must satisfy a sequential service constraint but partial or full suspension of convertibility is allowed consumers must be willing to deposit ex ante we show by examples that under the so called optimal contract the postdeposit game can have a run equilibrium given a propensity to run triggered by sunspots the optimal contract for the full predeposit game can be consistent with runs that occur with positive probability thus the diamond dybvig framework can explain bank runs as emerging in equilibrium under the optimal deposit contract

economic man social woman the case of the gender gap in support for the canada united states free trade agreement do differences in basic values and concerns underlie differences in the issue positions of women and men this article uses a decomposition approach to assess the contribution of male female differ

the social construction of an imperative why welfare reform happened in denmark and the netherlands but not in germany this article seeks to explain why denmark and the netherlands made dramatic progress reforming their welfare systems in the 1990s and why germany had a relatively slow start some possible explanations found to be incomplete are institutional differences in welfare programs the uniqueness of circumstances for example german unification and the balance of political power in governing institutions an important part of the puzzle is an increasing perception of the need to reform that was more widespread in denmark and the netherlands the social construction of an imperative to reform in these countries generated a political consensus that was elusive in germany but that may be developing under gerhard schroder s government

financial panics the seasonality of the nominal interest rate and the founding of the fed after the founding of the fed in 1914 the frequency of financial panics and the size of the seasonal movements in nominal interest ratesboth declined substantially this paper establishes that the fed by carrying out the seasonal open market policy that eliminated the seasonal in nominal interest rates caused the decrease in the frequency of panics since seasonal movements are anticipated and financial panics are probably real events the results show that an anticipated monetary policy had real effects on the economy copyright 1986 by american economic association

export diversification what s behind the hump hy should export diversification be taken as a policy objective per se there are two reasons that it should not first according to ricardo countries should specialize not diversify second the heckscher ohlin model implies that export patterns are largely determined by endowments so if anything we should worry about factor accumulation not diversification yet export diversification is a constant preoccupation of policymakers in developing countries as de ferranti et al 2002 note a recurrent preoccupation of latin american policymakers is that their natural riches produce a highly concentrated structure of export revenues which then leads to economic volatility and lower growth p 38 the notion that export patterns are fully determined by endowments is of course naive the relationship of endowments trade and growth is a complex and imperfectly understood one intra industry trade models showed long ago that many factors other than endowments including market failures and policies can affect trade patterns more recently hausmann hwang and rodrik 2007 argued that export patterns can display path dependence in the presence of externalities

from populism to neoliberalism labor unions and market reforms in latin america in the late 1980s populist labor parties which had advanced protectionism and state intervention in the postwar period implemented market oriented reforms in argentina mexico and venezuela in all three countries market reforms hurt their union allies the interaction between allied unions and governing labor parties however varied across countries and across sectors within the same country while some unions endorsed neoliberal reforms others rejected them despite their long term alliance with governing parties while some unions obtained concessions others failed to do so this article argues that the incentives created by partisan loyalties partisan competition and union competition explain these interactions partisan loyalty results from the long term affiliation of unions with a political party partisan competition takes place among union leaders affiliated with different political parties for the control of unions union competition occurs in diverse national and sectoral contexts among labor organizations for the representation of the same workers loyalty derived from a long term affiliation with the incumbent party facilitates collaboration between labor unions and the government yet if partisan competition makes loyal union leaders afraid of being replaced by activists affiliated with the opposition parties their incentives for militancy increase as a way of showing their responsiveness to the rank and file hurt by market reforms union competition for the representation of the same workers makes coordination more difficult thereby weakening unions and making them less likely to obtain concessions from the government despite their partisan loyalty the article presents empirical evidence from eighteen cases including national confederations and individual unions in five economic sectors in argentina mexico and venezuela to test this theory

volatility and development why is gdp growth so much more volatile in poor countries than in rich ones we identify four possible reasons i poor countries specialize in more volatile sectors ii poor countries specialize in fewer sectors iii poor countries experience more frequent and more severe aggregate shocks e g from macroeconomic policy and iv poor countries macroeconomic fluctuations are more highly correlated with the shocks of the sectors they specialize in we show how to decompose volatility into these four sources quantify their contribution to aggregate volatility and study how they relate to the stage of development we document the following regularities first as countries develop their productive structure moves from more volatile to less volatile sectors second the level of specialization declines with development at early stages and slowly increases at later stages of development third the volatility of country specific macroeconomic shocks falls with development fourth the covariance between sector specific and country specific shocks does not vary systematically with the level of development we argue that many theories linking volatility and development are not consistent with these findings and suggest new directions for future theoretical work

opening the window for reform mandates crises and extraordinary policy making under what conditions are governments within established democratic political systems willing and able to launch ambitious reform programs in other words what conjunctural factors generally serve to open the window for reform the central argument of this article is that extraordinary policy making generally becomes possible only when a macro window is opened by a government s achievement of an impressive mandate and or by the onset of a severe socioeconomic crisis the mandate reform hypothesis is tested with data from britain france and the united states then the significance of both mandates and crises is demonstrated through an analysis of eight reform government case studies ranging from the new deal to thatcher s britain

political responses to interdependence what s left for the left heightened economic interdependence in recent years is commonly argued to have generated great pressures for convergence in economic policies across the advanced industrial democracies interdependence has clearly had a great impact on the types of economic policies that governments can pursue they have been unable to pursue independent fiscal and monetary policies since the mid 1970s furthermore all governments have been forced to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets there are however different policies consistent with these goals statistical analyses of economic policies since the mid 1970s show that governments of the left and the right continue to be able to enact distinctive supply side policies that promote competitiveness and flexible adjustment and simultaneously further their partisan objectives

the subnational politics of economic adjustment provincial politics and fiscal performance in argentina existing research has failed to address the impact of subnational politics on economic adjustment this article attempts to fill this gap by outlining theoretical reasons for anticipating policy divergences across levels of government and by offering three hypotheses to account for variation at the subnational level the authors explore these ideas on the basis of the argentine experience the study traces the impact of subnational policy on argentine economic adjustment and tests hypotheses about subnational policy variation on the basis of provincial fiscal data the authors findings underline the importance of subnational policy choice for national performance and suggest a revised understanding of the role of political competition in the economic adjustment process the authors find considerable evidence that interactions between party competition and the structure of the public sector shape provincial fiscal performance and thereby condition the capacity for economic adjustment at the national level

public investment and economic growth this article uses an extension of mankiw romer and weil s augmented solow swan growth model to examine whether public investment has a distinct role as a determinant of economic growth it considers both the predictions of the model in steady state and in transition to steady state for the steady state model there is no significant effect from public investment on the level of output per worker using standard ordinary least squares ols methods for the transition model it observes a significant contribution to economic growth from public investment when instrumental variables methods are used however the associated standard errors are much larger and the contribution of public investment is statistically insignificant

distributional coalitions and the politics of economic reform in latin america for much of the discipline of economics a closed economy is seen as the result of efforts of distributional coalitions and rent seekers to maintain sector specific protections accordingly economic liberalization is explained by the policy consistency of uncompromising reform elites students of the politics of economic adjustment in the developing world in turn have argued that reform programs concentrate costs in the present and disperse benefits in the future hence losers are prepared to engage in collective action whereas prospective winners facing uncertainty about payoffs remain disorganized they thus posit the cohesiveness and insularity of policymakers as the main variable for explaining successful reform both economists and political scientists therefore adopt a collective action approach that overlooks how groups organize in support of liberalization in the recent latin american experience however these reforms have preserved market reserves for firms that provided vital political support to and often colluded with policymaking elites this setting has thus reproduced incentives for rent seeking behavior even in the presence of comprehensive liberalization this evidence supports two interrelated theoretical claims first distributional coalitions may proliferate when the state withdraws from the economy not only when it intervenes second interest based variables retain explanatory power in political economy which state autonomy arguments disregard irrespective of whether the economy is closed or open which neoclassical perspectives overlook to highlight the centrality of interest groups favoring marketization therefore the article suggests modifications to the dominant theories of collective action and the literature on the politics of economic adjustment

leftist parties neoliberal policies and reelection strategies the case of the pln in costa rica how do leftist parties in government abandon their traditional economic development programs adopt neoliberal policies and still win reelection this article examines the case of the leftist national liberation party pln in costa rica to explain this unexpected outcome the author argues that the explanation lies on two separate but related levels those of institutional rules and policy implementation strategies institutional rules constrain the behavior of political actors in multiple ways and structure political interaction however governments also employ specific policy implementation strategies e g obfuscation compensation division and incrementalism to adopt unpopular policies while reducing electoral costs as a result opposition to the reforms is more difficult to organize and potential negative consequences are difficult to identify for voters the institutional rules and the strategies that governments employ can account for the seeming paradox of a leftist party repeatedly abando

natural resources and economic growth the role of investment is it possible that excessive reliance on natural resources affects saving and investment in a way that retards economic growth and thus in the long run the level of output per capita this paper reviews the literature explores the data and compares and contrasts the explanatory power and interplay of natural resources and civil liberties our proxy for institutional variables currently under scrutiny in the literature we propose that natural resource dependence may be viewed as an exogenous factor that impedes economic growth and investment as well as institutions even if we stress that natural resource abundance may be good for growth

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null