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5891. The Benefits and Risks of Financial Globalization

Author:
Peter B. Kenen
Publication Date:
07-2007
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
It is by now almost impossible to conceive of a world without a global financial system. To be sure, large numbers of low-income developing countries have little access to that system. But most middle-income developing countries, even some that still have capital controls of one sort or another, are increasingly integrated into that system, and all of the major developed countries are fully integrated.
Topic:
Development, Economy, Integration, and Financial Globalization
Political Geography:
Global Focus

5892. The Conquest of Worldwide Inflation: Currency Competition and Its Implications for Interest Rates and the Yield Curve

Author:
Randall S. Kroszner
Publication Date:
07-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In the United States and in virtually every country around the world, inflation has declined, and in most countries dramatically so. In addition, the volatility of inflation and expectations of future inflation have also fallen significantly. I will call these changes experienced around the globe the conquest of worldwide inflation. I will begin by providing a few facts about the substantial improvement of inflation during roughly the past decade compared with the quarter century that preceded it. I will then try to understand why this remarkable decline in inflation has taken place. In particular, I argue that globalization, deregulation, and financial innovation, in part spurred by experiences of high inflation in the 1980s, have fostered currency competition that has led to improved central bank performance and, hence, the recent conquest of worldwide inflation. Friedrich Hayek (1976) had long ago advocated permitting greater competition among currencies, arguing that there would be a race to the top rather than a race to the bottom. Regardless of what one might think of Hayek’s policy proposals, technological change in a globalized and competitive marketplace, I believe, has increased competition among currencies issued by central banks.
Topic:
Economy, Inflation, Interest Rates, Currency, and Economic Competition
Political Geography:
Global Focus

5893. Fair Trade Coffee Enthusiasts Should Confront Reality

Author:
Jeremy Weber
Publication Date:
01-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
From university cafeterias to supermarkets in the developed world, people are buying Fair Trade (FT) coffee certified by the FLO-Cert, the certifying entity of Fairtrade Labelling Organizations International (FLO). The assumption is that such purchases will contribute to the welfare of marginalized producers in the developing world. While sales of FT coffee in Europe have stabilized, the North American and Japanese markets are growing rapidly. Total sales increased 40 percent from 2004 to 2005, to a total volume of 33,992 metric tons (MT) (FTO 2005). What is “Fair Trade”? According to FINE, the umbrella organization that comprises the four largest Fair Trade organizations (FLO, International Federation for Alternative Trade, Network of European World Shops, and the European Fair Trade Association), Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers—especially in the South [FINE 2001]. The FINE definition optimistically assumes that the trading partnerships and conditions promoted by Fair Trade necessarily “contribute to sustainable development.” It is true that the Fair Trade coffee system—the producers, exporters, importers, and retailers operating by the rules and standards of FLO—has improved living standards for many participating coffee growers (Bacon 2005, Raynolds 2004). Yet the system faces vexing issues such as a disconnect between promotional materials and reality, excess supply, and the marginalization of economically disadvantaged producers and groups. Those involved in Fair Trade coffee debates and governance must address these issues if Fair Trade is to be an effective mechanism for rural development in coffee producing regions.
Topic:
Development, Economy, Trade, Coffee, and Fair Trade
Political Geography:
Global Focus

5894. The Effect of Judicial Selection Processes on Judicial Quality: The Role of Partisan Politics

Author:
Russell S. Sobel and Joshua C. Hall
Publication Date:
01-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The quality of a state’s judicial system is an important determinant of economic growth and vitality. The decisions made within state judicial systems affect the degree to which private property rights are well-defined and enforced, which is an essential building block for entrepreneurial activity and economic growth. The key link between free-market institutions, such as secure property rights, and entrepreneurial activity has been demonstrated by Kreft and Sobel (2005) and Ovaska and Sobel (2005). Bad court decisions often infringe on the individual liberties and freedoms that are essential underpinnings for civil society and a well-functioning market economy (see Dorn 1985 and others in that special issue of the Cato Journal on this general topic). In addition, decisions made within state judicial systems also have important effects on the cost of doing business in a state. Poor liability rules reflected in state judicial decisions have been blamed for high medical malpractice rates, high workers’ compensation rates, and high automobile insurance rates in many states. Judicial decisions also impact the costliness of mandates and other regulations faced by businesses. Thus, it is clear that the judicial system is important for economic activity, and thus so is the selection mechanism that is used to determine the membership of state courts.
Topic:
Politics, Economic Growth, Judiciary, and Political Parties
Political Geography:
Global Focus

5895. Global Imbalances: Do They Matter?

Author:
Miranda Xafa
Publication Date:
01-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article reviews the recent literature on global imbalances and discusses the policy implications of the various theories that have been advanced to explain their unprecedented increase. Most of these theories fit the stylized facts, namely, the steady increase in the U.S. current account deficit, the shift to a surplus position of the developing countries, and the low nominal and real interest rates globally. The “low U.S. savings” theory—reflecting the increase in the fiscal deficit and in housing wealth—views the current account deficit as the result of fiscal and monetary policy decisions in the United States that need to be urgently reversed to prevent a crash landing. Other theories however, focusing on developments outside the United States, portfolio balance effects, or previously neglected benign factors, do not yield such a doomsday scenario. It is relevant to note that there is no historical precedent of disorderly exchange rate adjustment in industrial countries that keep inflation under control (Croke, Kamin, and Leduc 2005). Concerns over a disorderly unwinding of global imbalances therefore appear exaggerated. This view, prevalent among market participants and several prominent academics, has not been widely embraced by policymakers.
Topic:
Monetary Policy, Economy, Wealth, and Savings
Political Geography:
Global Focus and United States of America

5896. Economic Freedom and Net Business Formation

Author:
Noel D. Campbell and Tammy M. Rogers
Publication Date:
01-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Economic freedom indexes, especially the Fraser Institute/Cato Institute Economic Freedom of the World (EFW) index and the Heritage Foundation/Wall Street Journal Index of Economic Freedom, are becoming increasingly important as researchers seek to explore the link between economic freedom and prosperity. The consistent finding is that nations with more economic freedom—as indicated by security of property rights, free trade, limited government, low marginal tax rates, and so forth—enjoy higher per capita incomes and general living conditions compared with countries that are less free.1 In a less aggregated study, Karabegovic et al. (2003) find that differences in economic freedom across U.S. states and Canadian provinces are significantly and positively related to differences in the level and growth of economic activity across states and provinces. Various researchers have used the Economic Freedom of North America (EFNA) index, published by the Fraser Institute (Karabegovic, McMahon, and Mitchell 2005), to address questions of income differentials between states, income growth, and entrepreneurship.2 Scholars have also used the EFNA index to study migration. Ashby (2007), not surprisingly, finds that people tend to move from less free to more free areas.
Topic:
Migration, Economy, Business, Free Trade, and Freedom
Political Geography:
Global Focus

5897. Analysis of International Migration and its Impacts on Developing Countries

Author:
Paolo Barrientos
Publication Date:
11-2007
Content Type:
Working Paper
Institution:
Institute for Advanced Development Studies (INESAD)
Abstract:
This paper provides a review of the literature on the reasons and consequences of international migration. The principal determinants of migration are analyzed and it is seen that educated people from developing countries are more likely to migrate for several reasons (i.e. network determinants, costs of moving, pull factors and push factors). Looking into the empirical data, the global trend is that emigration of educated people (usually called “brain drain”) has increased a lot. This trend implies that industrialized countries are importing highly skilled people from developing countries and this will certainly have important consequences for developing countries in the long run. Some researchers argue that developing countries will loose, since the most qualified people leave and stop contributing to their country. Others say that the global trend can be beneficial because positive spillovers will be created; in the sense that developing countries will experience higher investments in human capital (“brain gain”). Empirical findings show that these spillovers depend on the probability to migrate and the stock of human capital that a country has. Finally another group of researchers argues that this process is inevitable, and barriers to migration should be abolished in order to reap the benefits for both sending and receiving countries as well as the migrants themselves.
Topic:
Development, Migration, Brain Drain, and Human Capital
Political Geography:
Global Focus

5898. The Financial Sector and Economic Development: Banking on the Role of Human Capital

Author:
Manuela W. Armenta
Publication Date:
05-2007
Content Type:
Journal Article
Journal:
Journal of Public and International Affairs (JPIA)
Institution:
School of Public and International Affairs (SPIA), Princeton University
Abstract:
Evidence suggests that human capital development contributes to the stability of banks. Unfortunately, developing countries, both pre- and post-liberalization, often suffer from an inadequate supply of capable professionals. This situation threatens the potentially positive relationship between financial liberalization and economic growth. It is therefore urgent that developing states develop policies aimed at addressing the supply and demand-side requirements of the financial sector. Such policies must target the development of professionals with both appropriate academic backgrounds in business and the requisite on-the-job skills. Public-private solutions are advocated as the most efficient and effective approach to the development of comprehensive policies in this regard.
Topic:
Development, Economics, Finance, Human Capital, Banking, and Public-Private Partnership
Political Geography:
Global Focus

5899. 2007-2008 Guide to Women Leaders in International Affairs

Author:
Women's Foreign Policy Group (WFPG)
Publication Date:
12-2007
Content Type:
Special Report
Institution:
Women's Foreign Policy Group (WFPG)
Abstract:
WFPG's Guide to Women Leaders in International Affairs highlights women shaping foreign policy around the world and the role that they play as leaders, diplomats, and policymakers. The Guide provides an index of prominent women from across the international community, including heads of state and government, government ministers and diplomats, and leaders of international organizations and corporations.
Topic:
Foreign Policy, Government, United Nations, Women, Leadership, and NGOs
Political Geography:
Global Focus

5900. How to Win the Olympic Games - The Empirics of Key Success Factors of Olympic Bids

Author:
Arne Feddersen and Wolfgang Maennig
Publication Date:
09-2007
Content Type:
Working Paper
Institution:
Chair for Economic Policy, University of Hamburg
Abstract:
This paper examines the probability of the success of city bid campaigns on the basis of quantified determinants for a total of 48 bids for the Summer Olympic Games between 1992 and 2012. Using a model comprising the distance of sporting venues from the Olympic Village, local temperatures and unemployment rates, we can correctly predict the decision for 100% of failed bids and 50% of successful bids.
Topic:
Economics, Sports, Olympics, and Bids
Political Geography:
Global Focus