UPDATED:
10 February, 2006
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Is
the Franc Zone an Optimal Currency Area?
(file size: 120K, last updated: 01/2000)
Abstract: In this paper we modify the method of Blanchard and Quah (1989) in order to estimate a structural VAR model appropriate for a small open economy. In this way we identify shocks to output and prices in the members of the two monetary unions that make up the African CFA Franc Zone. The costs of monetary union membership will depend on the extent to which price and output shocks are correlated across countries, and the degree of similarity in the long run effects of the shocks on the macro-economy. The policy conclusions depend on the relative importance of different macroeconomic variables to policymakers, and the speed with which a policymaker is able to respond to a shock.
Economic
Consequences of the Intifada: Investment and Political Instability
in Israel
(file size: 203K, last updated: 01/2000)
Abstract: We construct a time-series model of investment in Israel that incorporates both traditional economic factors derived from a theoretical model of a profit-maximising representative firm and indicators of political instability and unrest. This is used to estimate the extent to which the Intifada has depressed Israeli investment and the size of the corresponding "peace dividend".
Output
Risk in Tuscan Agriculture in the Late 19th and Early 20th Centuries
(file size: 103K, last updated: 04/2000)
Abstract: We analyse output risk in Italian agriculture over the period 1870- 1914. We use data on a set of 16 tenanted plots grouped into three farms comprising a single large estate. We estimate the degree of risk associated with each separate crop, with the portfolio of crops at the level of the plot, the farm and the estate. We highlight two particular features: the relatively high risk associated with tree crops (wine, oil and nuts); and the substantial scope for the landlord to reduce risk through crop diversification across plots. We discuss the implications of these for tenure contract theory.
Forecast
Uncertainties in Macroeconometric Models: An Application to the
UK Economy
(file size: 583K, last updated: 06/2000)
Abstract: This paper argues that probability forecasts convey information on the uncertainties that surround macro-economic forecasts in a manner which is straightforward and which is preferable to other alternatives, including the use of confidence intervals. Probability forecasts relating to UK output growth and inflation, obtained using a small macro- econometric model, are presented. We discuss in detail the probability that inflation will fall within the Bank of England’s target range and that recession will be avoided, both as separate single events and jointly. The probability forecasts are also used to provide insights on the interrelatedness of output growth and inflation outcomes at different horizons.
Financial
Restraints in the South Korean Miracle
(file size: 74K, last updated: 09/2000)
Abstract: We provide novel empirical evidence on the effects of financial restraints on South Korean financial development. The evidence is linked to a simple model of the Korean banking system that encapsulates its cartelised nature, which predicts a positive association between financial development and (i) the degree of state control over the banking system, (ii) mild repression of lending rates. The model also predicts that in the presence of lending rate controls, increases in the level of the administered deposit rate are unlikely to influence financial deepening. We test the model empirically by constructing individual and summary measures of financial restraints. Our empirical findings are consistent with our theoretical predictions but contrast sharply with the predictions of earlier literature that postulates that interest rate ceilings and other financial restraints constitute sources of ‘financial repression’.
Financial
Liberalization and Credit-Asset Booms and Busts in East Asia
(file size: 350K, last updated: 01/2000)
Abstract: This paper presents econometric evidence that sheds new light on the role played by financial liberalization in the Korean and Thai financial crises. Drawing on previous empirical studies, it argues that while the banking systems of both Korea and Thailand supported their remarkable long-run growth performance, they were ill prepared to face the risks emanating from financial liberalization. New evidence is then presented which shows that financial liberalization set in motion a classic credit-asset boom and bust cycle in Thailand and created other weaknesses in the Korean financial system, which made both economies vulnerable to the sentiments of foreign investors and lenders. When capital flows were reversed, the ensuing liquidity crisis triggered a bust that was further magnified by currency depreciations and interest rate hikes.
In the light of this analysis, the paper argues that besides strengthening prudential regulation and accounting standards, there is a need for upgrading management systems and expertise to deal with financial risks and an important need for a more widespread appreciation of the risks associated with financial liberalization. Furthermore, there remain gaps in the international financial architecture that need to be addressed, such as the absence of an effective international lender of last resort. Given that these weaknesses may require a long time to address, it is argued that in the interim period financial restraints can act as a relatively cheap, effective and transparent safety device in safeguarding financial stability.
Modeling
Macroeconomic Shocks in the CFA Franc Zone
(file size: 311K, last updated: 11/2000)
Abstract: In this paper we modify the method of Blanchard and Quah (1989) in order to estimate a structural VAR model appropriate for a small open economy. In this way we identify shocks to output and prices in the members of the two monetary unions that make up the African CFA Franc Zone. The costs of monetary union membership will depend on the extent to which price and output shocks are correlated across countries, and the degree of similarity in the long run effects of the shocks on the macro-economy. The policy conclusions depend on the relative importance of different macroeconomic variables to policymakers, and the speed with which a policymaker is able to respond to a shock.
Counting
the Cost of the Intifada: Consumption,Saving and Political Instability
in Israel
(file size: 138K, last updated: 11/2000)
Abstract: In this paper we investigate some of the ways in which short-term variations in the magnitude of political instability can impact on macroeconomic performance, taking the example of Israel since 1987. Several indicators of political instability are found to have a significant impact on aggregate consumption and savings, and explain a large part of poor Israeli savings performance over recent years.
Can
Political Instability Generate Business Cycles? Evidence from the
Intifada
(file size: 363K, last updated: 11/2000)
Abstract: This paper presents an econometric model that combines macroeconomic time series data with historical series relating to political instability in Israel during the Intifada period, in order to provide a conservative estimate of the extent to which variations in economic performance over time have a political explanation. Political instability is found to have a substantial effect on the cyclical component of aggregate output.
Strategy
Choices of Firms and Market Structure
(file size: 148K, last updated: 12/2000)
Abstract: This paper suggests a new approach to the empirical analysis of market structure. Market concentration is an aspect of distribution of market shares of firms, and market shares are best modelled at the firm level, bringing into play strategy choices made by firms. It follows that a useful approach to explaining concentration would be a two stage one: to estimate firm size or market shares as a function of firm level determinants, and to use the information in these estimates to assess the relative contributions of firm characteristics to concentration. The method is illustrated by application to selected Polish manufacturing industries in the early transition period.
Monetary
Policy and the Exchange Rate During the Asian Crisis: Identification
Through Heteroscedasticity
(file size: 208K, last updated: 02/2002)
Abstract: This paper examines whether a monetary policy tightening (i.e., an increase in the domestic interest rate) was successful in defending the exchange rate from speculative pressures during the Asian financial crisis. We estimate a bivariate VECM for four Asian countries, and improve upon existing studies in two important ways. First, by using a long data span we are able to compare the effects of an interest rate rise on the nominal exchange rate during tranquil and turbulent periods. Second, we take into account the endogeneity of interest rates and identify the system by exploiting the heteroscedasticity properties of the relevant time series, as suggested by Sentana and Fiorentini (2001). We find that while tight monetary policy helped to defend the exchange rate during tranquil periods, it had the opposite effect during the Asian crisis.
Crime
and Punishment: On the Optimality of Imprisonment although Fines
are Feasible
Wages,
Supervision and Sharing
Pay
Differentials, Discrimination and Worker Grievances
Forecasting
Residential Burglary
The
Remuneration of British Academics