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91. Macroeconomic Impact of Capital Flight in Sub-Saharan Africa

Author:
John Weeks
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
This paper assesses the impact of capital flight on growth in thirty-one sub-Saharan African countries. It first considers the “macro fundamentals” hypothesis that capital flight would be lower in a country whose government adhered to “sound” macroeconomic policies. Analytical considerations fail to support this hypothesis. Second, it develops a growth estimating equation derived from the Harrod-Domar framework. The growth estimations support the conclusion that capital flight had a major impact on growth over the last three decades, 1980–2010. The negative impact was greatest for the petroleum-exporting countries and those affected by internal conflict, but it was also substantial for the other countries, with a few exceptions.
Topic:
Economics, Markets, Global Markets, Economic Growth, Economic Policy, Macroeconomics, and Capital Flight
Political Geography:
Africa, Sudan, Nigeria, Angola, Chad, Cameroon, Global Focus, Gabon, and Republic of Congo

92. Wine as a Cultural Product: Symbolic Capital and Price Formation in the Wine Field.

Author:
Jens Beckert, Jörg Rössel, and Patrick Schenck
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Understanding the valuation of goods in markets has become one of the key topics in economic sociology in recent years. Especially in markets for goods that are valued for their aesthetic qualities, the ascription of value appears to be a complex social process because product quality is highly uncertain. The wine market is an extraordinary example because most consumers and even experts are not able to differentiate between wines based on objective sensory characteristics and cannot rank wines in blind tastings according to their price. Our premise is that assessed quality differences cannot be explained by the sensual qualities of the wine. Instead, we explain variations in valuation by social processes in which quality is constructed and contested. To do so we make use of Bourdieu’s field theoretical perspective, which is strongly supported in our empirical analysis of the German wine field. It shows that his model of the structure of fields has considerable power in explaining price differentiation between wineries and that the orientation of consumers towards different segments of the field is based on class hierarchy.
Topic:
Economics, International Trade and Finance, Markets, Food, and Sociology
Political Geography:
Global Focus

93. Capitalist Dynamics: Fictional Expectations and the Openness of the Future.

Author:
Jens Beckert
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Capitalism is an economic and social order oriented toward the future. In this paper, I describe the unfolding of the temporal order of capitalism and relate it to the restless dynamism of capitalism we have observed since the Industrial Revolution. Since the future is open, actors are confronted with the uncertainty of the outcomes of their decisions. What can expectations be under conditions of uncertainty? To answer this question, I introduce the notion of fictional expectations which can be used to describe decisions made under conditions of an open and uncertain future. In the paper’s penultimate section, I apply the concept of fictional expectations to the analysis of four crucial processes of capitalism: money and credit, investments, innovation, and consumption. The main thrust of the paper is that in order to understand economic action in capitalism, actors’ perceptions of the future need to take center stage. Not only “history matters,” but also the “future matters.”
Topic:
Economics, Markets, Socialism/Marxism, Social Movement, and Capitalism
Political Geography:
Global Focus

94. Disruptive Innovation: Risk-Shifting and Precarity in the Age of Uber

Author:
Emily Isaac
Publication Date:
12-2014
Content Type:
Working Paper
Abstract:
Over the past 30 years, economic restructuring and advancements in technological innovation have allowed for the emergence of new business models that disrupt many longstanding industries. Much of the industry disruption that we see today stems from tech companies and startups that have developed a better cost-model by utilizing smart phone-enabled apps to offer simpler and less expensive products and services than those offered by competing incumbents. Uber Technologies Inc., an on-demand ridesharing service that connects passengers to local drivers in real time using smartphone technology, is one of the most disruptive, successful tech start-ups yet. Uber’s success, which can be attributed to a low fixed-cost model that provides ride-seekers a faster and more reliable alternative to the traditional taxi and promises drivers a higher hourly earning through the avoidance of costly regulations, has severely disrupted the taxi service industry. In cities around the world, taxi companies are losing their customers and their drivers to Uber and similar “transportation network companies” (TNCs), such as Lyft, Sidecar, and Hailo.
Topic:
Economics, Markets, Science and Technology, and Infrastructure
Political Geography:
Global Focus

95. Estimating U.S. Cross-Border Securities Positions: New Data and New Methods

Author:
Carol C. Bertaut
Publication Date:
08-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The role of capital flows in the buildup to the global financial crisis and the potential vulnerabilities posed by capital flows to emerging market economies highlight the importance of reliable and timely measures of cross-border investment activity to better monitor developments as they unfold. We present new monthly estimates of U.S. cross-border securities investment, combining information from detailed annual Treasury International Capital (TIC) surveys with new information from the TIC form SLT. We also show how changes in the new monthly data can be decomposed into flows, estimated valuation changes, and a residual "gap". These decompositions can provide a richer and timelier view of developments in both foreign portfolio investment in the U.S. and U.S. portfolio investment abroad than available from transactions data or survey data alone. Data on cross-border holdings through December 2013, by country, are available for download; we also provide advice on how to construct estimates going forward. These data can be combined with the existing Bertaut-Tryon monthly estimates of securities holdings (now updated through 2011) to generate consistent monthly time series of positions.
Topic:
Emerging Markets, Markets, Global Financial Crisis, Capital Flows, and Investment
Political Geography:
Global Focus

96. Generating Options-Implied Probability Densities to Understand Oil Market Events

Author:
Deepa Dhume Datta, Juan M. Londono, and Landon J. Ross
Publication Date:
10-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We investigate the informational content of options-implied probability density functions (PDFs) for the future price of oil. Using a semiparametric variant of the methodology in Breeden and Litzenberger (1978), we investigate the fit and smoothness of distributions derived from alternative PDF estimation methods, and develop a set of robust summary statistics. Using PDFs estimated around episodes of high geopolitical tensions, oil supply disruptions, and macroeconomic data releases, we explore the extent to which oil price movements are expected or unexpected, and whether agents believe these movements to be persistent or temporary.
Topic:
Energy Policy, International Trade and Finance, Markets, Oil, Economic Theory, and Models
Political Geography:
Global Focus

97. Price Non-Convergence in Commodities: A Case Study of the Wheat Conundrum

Author:
Sophie van Huellen
Publication Date:
10-2013
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The close relationship between commodity future and cash prices is critical for the effectiveness of risk management and the functioning of price discovery. However, in recent years, commodity futures prices, across the board, have appeared increasingly detached from prices on physical markets. This paper argues that while various factors, identified in previous literature, which introduced limits to arbitrage have facilitated non-convergence, the actual extent of non-convergence in these markets is caused by essential differences in the mechanisms of price formation on physical and derivative markets. With reference to the particular case of the CBOT wheat market, the paper shows that the size of the spread between futures and cash prices can be theoretically and empirically linked to the increasing inflow of financial investment into commodity futures markets.
Topic:
Agriculture, Markets, Commodities, and Financialisation
Political Geography:
Global Focus

98. A Robust Neighborhood Truncation Approach to Estimation of Integrated Quarticity

Author:
Torben G. Andersen, Dobrislav Dobrev, and Ernst Schaumburg
Publication Date:
04-2013
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We provide a first in-depth look at robust estimation of integrated quarticity (IQ) based on high frequency data. IQ is the key ingredient enabling inference about volatility and the presence of jumps in financial time series and is thus of considerable interest in applications. We document the significant empirical challenges for IQ estimation posed by commonly encountered data imperfections and set forth three complementary approaches for improving IQ based inference. First, we show that many common deviations from the jump diffusive null can be dealt with by a novel filtering scheme that generalizes truncation of individual returns to truncation of arbitrary functionals on return blocks. Second, we propose a new family of efficient robust neighborhood truncation (RNT) estimators for integrated power variation based on order statistics of a set of unbiased local power variation estimators on a block of returns. Third, we find that ratio-based inference, originally proposed in this context by Barndorff-Nielsen and Shephard (2002), has desirable robustness properties in the face of regularly occurring data imperfections and thus is well suited for empirical applications. We confirm that the proposed filtering scheme and the RNT estimators perform well in our extensive simulation designs and in an application to the individual Dow Jones 30 stocks.
Topic:
Economics, Markets, Models, and Stock Markets
Political Geography:
Global Focus

99. (Re-) Conceptualising the Space of Markets: The Case of the 2007-9 Global Financial Crisis

Author:
Andrew Jones
Publication Date:
01-2013
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
The 2007-9 period saw an unprecedented crisis emerge in global financial markets with the collapse of several large western financial institutions, and the nearest moment of systemic crisis yet witnessed in the globalized financial system. The crisis has thus provoked a significant questioning of market theories, and in particular understandings of market within orthodox neoclassical economics. Within the social sciences, a significant element of this response has built on a growing heterodox socioeconomic literature which is heavily critical of hegemonic conceptions of the market within economics. However, whilst a small body of work in economic geography has begun to engage with this literature, geographical thinking has not directly sought to conceptualise the nature and significance of market spatiality. Utilizing a cultural economy approach, this paper therefore argues that economic geographical theories need to foreground the concept of market rather than treat markets as a ‘component’ of wider processes. It further contends that the concept of the ‘market’ needs to be reconceptualised in a way that captures the spatialities of markets and the difference that space makes to market behaviours and outcomes. Drawing on the growing heterodox socioeconomic literature on markets, it thus proposes a practice-oriented ‘socio-spatial approach’ for framing conceptions of market spatiality, arguing that such a spatial epistemology opens up a range of theoretical possibilities for further contesting hegemonic neoclassical theories of the market beyond current socioeconomic critiques. It seeks to illustrate the utility of such a framework through a case study analysis of the limitations inherent in existing policy practices surrounding the early phase of the recent global financial crisis.
Topic:
Economics, Markets, Financial Crisis, and Culture
Political Geography:
Global Focus

100. Filling the Values Vacuum: The Role of Western Business in Emerging Markets

Author:
James P. Cain
Publication Date:
05-2012
Content Type:
Working Paper
Abstract:
Dubai markets itself as the place where “the developed world and the emerging world meet”. Judging by the diversity amongst the almost 500,000 visitors to the Dubai Mall one recent April Saturday, the label appears to fit. Teeming with Asians, Indians, Eastern and Western Europeans, West Africans, neighbors from the Gulf and even a few Americans, the mostly under-30 crowds displayed the commercial frenzy that has been in short supply in the West in recent years. Exploring the ground level of the Mall, just across from the famous Dubai fountains and the 163-story Burj Khalifa, I was delighted to discover that the most popular and packed restaurant concept did not showcase a Mediterranean, Italian, or French moniker but a uniquely American one—Texas Roadhouse. Hand-cut steaks, Texas-size rib combos, and country dinners filled patron’s plates while the line-dancing wait staff that propelled this Kentucky-based chain to popularity in the U.S. a few years ago delighted hungry customers this April afternoon. As growth, urbanization, and megacity development proceed in Asia, Latin America, the former Soviet states, the Middle East and even Africa, Western consumer and retail brands are being met with surprisingly robust popularity. At the recent Gulf Food show not far from the Dubai Mall, a medium-sized U.S. company was awarded “World’s Best New Halal Food”. There is an immensely important lesson here: as Western governments curb spending on foreign aid, development assistance and commercial programs, a “values vacuum” is developing into which institutions, cultures and governments are stepping to promote their own ideologies and cultural values, or lack thereof. Already the largest trading partner in many South American countries, China built and paid for a $105 million soccer stadium in Costa Rica, but only after government officials waived the country’s tough labor laws. Russian companies are gobbling up natural resources in Africa as well as energy, infrastructure and telecommunications assets in Ukraine and Kazakhstan. With influence from Venezuela and its ally Iran, the newly formed “Community of Latin American and Caribbean States” proudly excludes America and Canada.
Topic:
Emerging Markets, International Trade and Finance, Markets, and Finance
Political Geography:
Global Focus