globalization and emerging markets with or without crash we analyze the effects of financial and trade globalization on the likelihood of financial crashes in emerging markets while trade globalization always makes crashes less likely financial globalization may make them more likely especially when trade costs are high pessimistic expectations can be self fulfilling and lead to a collapse in demand for goods and assets such a crash comes with a current account reversal and drops in income and investment lower income countries are more prone to such demand based financial crises a quantitative evaluation shows our model is consistent with the main stylized facts of financial crashes in emerging markets

cyclical industrial dynamics in the global it sector origins and sequencing in this article we investigate the origins and dynamics of cyclical behaviour in the it sector our lead lag analysis shows the historical cyclical patterns involved in the global semiconductor industry the computer industry and the flat panel display industry based on the granger causality tests derived from a vector autoregressive var model we find that in the global semiconductor industry changes in capacity utilization precede changes in sales which in turn leads to changes in semiconductor price

dispersion in macroeconomic volatility between the core and periphery of the international trade network abstract at the country level macroeconomic volatility tends to correlate with trade openness although the direction of correlation is not stable across samples higher openness allows for greater diversification opportunities but provides lesser immunity from outside shocks here i consider trade network as a composite of all pairwise trade linkages to emphasize that different linkages contribute differently to the transmission or mitigation of shocks and show that volatility is inversely related to centrality a summary measure of strength of the linkages specific to a country i study a dynamic multi country multi sector model subject to idiosyncratic liquidity shocks and characterize volatility as an explicit function of centrality diversification and the herfindahl of the trade network in equilibrium with sufficient skewness in the trade linkages across countries similar shocks generate substantially different levels of repercussions across the network the conventional effect of diversification holds true that countries with better diversified trade portfolio fluctuate less centrality directly contributes to higher resilience to exogenous shocks thus reducing volatility combined effect of these two mechanisms dominates the opposite effect that a more central country is also more exposed to shocks which increases volatility the model calibrated to the eu generates and closely replicates the negative relationship between centrality and volatility the theoretical model is then extended to capture preference shocks and sparseness of the trade networks

the relative productivity hypothesis of industrialization the american case 1820 to 1850 a two sector model is used to explore the role of the agricultural sector in the process of industrialization our hypothesis is that areas industrialize earlier where the wages for females and children relative to those for adult males are initially low furthermore the lower this relative productivity of females and children in the pre industrial economy the proportionately more will their relative wages increase and the higher will be the ratio of manufactured to agricultural goods the model is used to interpret the conditions that fostered the rapid industrialization of the american northeast but not the south from 1820 to 1850

it based technical change and job instability we investigate the impact of it diffusion on the stability of employment we document the evolution of different components of job instability over a panel of 348 cities in france from the mid 1970s to the early 2000s the evidence goes against the view that the diffusion of it has spurred job instability yet analysing long term differences in the occupational structure we find that it diffusion has increased the share of high skill occupations at the expense of low skill occupations this is consistent with french firms reliance on their internal labour market to meet the new skill requirements associated with it diffusion

cycles in natural resource commodity prices an analysis of the frequency domain abstract a model is derived that relates price cycles to investment behavior in the mineral industries and predicts that these cycles will be roughly twice as long as the investment period the period between the investment decision and the project completion spectral techniques are used to estimate the principal cycles in metal and fuel prices for the metals the estimated cycle lengths reinforce the model predictions however no significant cycles are found in the prices of the fuels the lead lag relationships between prices of different commodities are also investigated and are found to be significant for those that are jointly produced

labor market monopsony there has been a renewed interest in monopsony in labor markets in recent years that includes both the traditional static approach to monopsony ably reviewed by boal and ransom 1997 and the new approach to monopsony with more attention paid to dynamic issues developed in detail by manning 2003 the articles presented in this supplement highlight both approaches and illustrate the range of labor market settings in which the exercise of monopsony power may be important the first use of the term monopsony in economics is widely attributed to robinson 1969 robinson conceived of monopsony as analogous to monopoly whereas monopoly refers to the case of a single seller confronted in a market by many buyers monopsony refers to the case of a single buyer confronted in a market by many sellers just as the monopolist faces a downward sloping demand curve for his product and

which bank is the central bank abstract liquidity flows through a financial network cannot be accurately described using external processing constraints alone behavioral aspects of participants also matter a method similar to google s pagerank procedure is used to produce a ranking of participants in the canadian large value transfer system in terms of their daily liquidity holdings accounting for differences in banks processing speeds is essential for explaining why observed distributions of liquidity differ from the initial distributions which are determined by the credit limits selected by banks delay tendencies of banks are unobservable in the data and are estimated using a markov model

monetary policy and distribution a segmented markets model of monetary policy is constructed in which a novel feature is goods market segmentation and its relationship to conventional asset market segmentation the implications of the model for the response of prices interest rates consumption labor supply and output to monetary policy are determined as well optimal monetary policy is studied as are the costs of inflation the model features persistent nonneutralities of money relative price effects of increases in the money supply persistent liquidity effects and a negative fisher effect from a money supply increase a friedman rule is in general suboptimal

changes in job instability and insecurity using monthly survey data this article provides evidence on changes in short term job instability and insecurity using the survey of income and program participation monthly measures from this data set are contrasted with annual measures from the survey of income and program participation and the panel study of income dynamics neither data set shows an increase in job turnover during the 1980s and 1990s we also examine indicators of increased insecurity these include the probability that a job ends involuntarily is followed by a spell of nonemployment or that the subsequent job has lower wages these indicators of insecurity also show no upward trend

workers machines and economic growth this paper models technology adoption as replacing workers by machines which perform the same job in the production process the paper shows that such modelling of technology adoption affects significantly the analysis of economic growth this model can explain large and persistent international differences in output levels and growth rates caused by small differences in underlying parameters

should the personal computer be considered a technological revolution evidence from u s metropolitan areas the introduction and diffusion of personal computers are widely viewed as a technological revolution using u s metropolitan area level panel data this paper asks whether links between pc adoption educational attainment and the return to skill conform to a model of technological revolutions in which the speed and extent of adoption are endogenous the model implies that cities will adjust differently to the arrival of a more skill intensive means of production with the returns to skill increasing most where skill is abundant and its return is low we show that the cross city data fit many of the predictions of the model during the period 1980 2000 the pc diffusion era

forecasting the semiconductor industry cycles by bootstrap prediction intervals in recent years there has been a recognition that point forecasts of the semiconductor industry sales may often be of limited value there is substantial interest for a policy maker or an individual investor in knowing the degree of uncertainty that attaches to the point forecast before deciding whether to increase production of semiconductors or purchase a particular share from the semiconductor stock market in this article i first obtain the bootstrap prediction intervals of the global semiconductor industry cycles by a vector autoregressive var model using monthly us data consisting of four macroeconomic and seven industry level variables with 92 observations the 24 step ahead out of sample forecasts from various var setups are used for comparison the empirical result shows that the proposed 11 variable var model with the appropriate lag length captures the cyclical behaviour of the industry and outperforms other var models in terms of both point forecast and prediction interval

declining job security this article defines and analyzes job security in the context of implicit contracts designed to overcome incentive problems in the employment relationship contracts of this nature generate predictions concerning the relationship between job security parameters such as worker seniority and sectoral economic conditions and the probability of separations to test these predictions i estimate binomial and multinomial models of job separations using panel study of income dynamics psid data for the years 1976 93 the results are consistent with a decline over time in the incentives to maintain existing employment relationships for male workers and for skilled white collar women

equilibrium bias of technology this paper presents three sets of results about equilibrium bias of technology first i show that when the menu of technological possibilities only allows for factor augmenting technologies the increase in the supply of a factor induces technological change relatively biased toward that factor meaning that the induced technological change increases the relative marginal product of the factor becoming more abundant moreover this induced bias can be strong enough to make the relative marginal product of a factor increasing in response to an increase in its supply thus leading to an upward sloping relative demand curve i also show that these results about relative bias do not generalize when more general menus of technological possibilities are considered second i prove that under mild assumptions the increase in the supply of a factor induces technological change that is absolutely biased toward that factor meaning that it increases its marginal product at given factor proportions the third and most important result in the paper establishes the possibility of and conditions for strong absolute equilibrium bias whereby the price marginal product of a factor increases in response to an increase in its supply i prove that under some regularity conditions there will be strong absolute equilibrium bias if and only if the aggregate production function of the economy fails to be jointly concave in factors and technology this type of failure of joint concavity is possible in economies where equilibrium factor demands and technologies result from the decisions of different agents

does openness to trade make countries more vulnerable to sudden stops or less using gravity to establish causality openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflows several authors have offered empirical evidence that having a large tradable sector reduces the contraction necessary to adjust to a given cut off in funding such studies may however be subject to the problem that trade is endogenous we use the gravity instrument for trade openness which is constructed from geographical determinants of bilateral trade we find that openness indeed makes countries less vulnerable to crises and that the relationship is even stronger when correcting for the endogeneity of trade

the architecture of globalization a network approach to international economic integration we combine data on international trade linkages with network methods to examine the global trading system as an interdependent complex network we map the topology of the international trade network and suggest new network based measures of international economic integration at both a global system wide level and a local country level we develop network based measures that incorporate not only the volume of trade but also the influence that a country has on the international trading system these measures incorporate the structure and function of the network and may provide a more meaningful approach to globalization than current measures based on trade volumes we find that in terms of participation and influence in the network global trade is hierarchical with a core periphery structure at higher levels of trade though integration of smaller countries into the network increased considerably over the 1990s the network is strongly balkanized according to geography of trading partners but not as strongly by income or legal origin using these new measures we find that a country s position in the network has substantial implications for economic growth we therefore suggest that a network approach to international economic integration has potential for useful applications in international business finance and development

trade openness and volatility abstract this paper examines the mechanisms through which output volatility is related to trade openness using an industry level panel data set of manufacturing production and trade the main results are threefold first sectors more open to international trade are more volatile second trade is accompanied by increased specialization these two forces imply increased aggregate volatility third sectors that are more open to trade are less correlated with the rest of the economy an effect that acts to reduce overall volatility the point estimates indicate that each of the three effects has an appreciable impact on aggregate volatility added together they imply that the relationship between trade openness and overall volatility is positive and economically significant

financial networks and contagion we study cascades of failures in a network of interdependent financial organizations how discontinuous changes in asset values e g defaults and shutdowns trigger further failures and how this depends on network structure integration greater dependence on counterparties and diversification more counterparties per organization have different nonmonotonic effects on the extent of cascades diversification connects the network initially permitting cascades to travel but as it increases further organizations are better insured against one another s failures integration also faces trade offs increased dependence on other organizations versus less sensitivity to own investments finally we illustrate the model with data on european debt cross holdings jel d85 f15 f34 f36 f65 g15 g32 g33 g38 globalization brings with it increased financial interdependencies among many kinds of organizations governments central banks investment banks firms etc that hold each other s shares debts and other obligations such interdependencies can lead to cascading defaults and failures which are often avoided through massive bailouts of institutions deemed too big to fail recent examples include the us government s interventions in aig fannie mae freddie mac and general motors and the european commission s interventions in greece and spain although such bailouts circumvent the widespread failures that were more prevalent in the nineteenth and early twentieth centuries they emphasize the need to study the risks created by a network of interdependencies understanding these risks is crucial to designing incentives and regulatory responses which defuse cascades before they are imminent in this paper we develop a general model that produces new insights regarding financial contagions and cascades of failures among organizations linked through a network of financial interdependencies organizations values depend on each other e g through cross holdings of shares debt or other liabilities if an

financial contagion on the international trade network we combine data on international trade linkages with a network approach to map the global trading system as an interdependent complex network this enables us to obtain indicators of how well connected a country is into the global trading system we use these network based measures of connectedness to explain stock market returns during recent episodes of financial crisis we find that a crisis is amplified if the epicenter country is better integrated into the trade network however target countries affected by such a shock are in turn better able to dissipate the impact if they are well integrated into the network a network approach can help explain why the mexican asian and russian financial crises were highly contagious while the crises that originated in venezuela and argentina did not have such a virulent effect we suggest that a network approach incorporating the cascading and diffusion of interdependent ripples when a shock hits a specific part of the global trade network provides us with an improved explanation of financial contagion jel f10 f36 f40 g15

changes in job security and their causes an empirical analysis for france 1982 2002 abstract in this paper we analyze the changes in the risks of involuntary job loss in france between 1982 and 2002 we find that these risks are higher in the 1990s than they were in the 1980s we develop an econometric analysis to separate the effects of institutional changes from the effects of new technologies our estimates show that the rise in job loss rates is significantly more pronounced in industries that have the largest share of r d workers and the largest rate of new technologies users these findings suggest that technological changes contribute to decreasing the incentive to keep workers for long period of time and to increasing job insecurity

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

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances