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6141. Acquisition of National Security Space Programs

Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The Undersecretary of Defense (Acquisition, Technology, and Logistics) and the Secretary of the Air Force cosponsored the Joint Defense Science Board (DSB)/Air Force Science Advisory Board (AFSAB) Task Force on the Acquisition of National Security Space Programs and directed the task force to Recommend improvements to the acquisition of space programs from initiation to deployment; Assess the nation's dependency on space; Characterize problems by looking at underlying causes and systemic issues such as cost growth and schedule delays that impact all space programs; and Analyze the Space-Based Infrared System (SBIRS), Future Imaging Architecture (FIA), and Evolved Expendable Launch Vehicle (EELV).
Topic:
Security and Defense Policy
Political Geography:
United States

6142. Annual Report of the United States Commission on International Religious Freedom

Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The United States Commission on International Religious Freedom (USCIRF) is an independent federal government agency created by the International Religious Freedom Act of 1998 (IRFA) to monitor religious freedom in other countries and advise the President, Secretary of State, and Congress on how best to promote it. The Commission is the only government commission in the world with a mandate to review and report violations of the internationally-guaranteed right to freedom of religion and belief worldwide. By providing reliable information, analysis, and careful and creative policy recommendations, the Commission gives the U.S. government and the American public the tools necessary to promote religious freedom throughout the world.
Topic:
Foreign Policy, Diplomacy, Government, Human Rights, and Religion
Political Geography:
United States

6143. Foreign Portfolio Investment, Foreign Bank Lending, and Economic Growth

Author:
J. Benson Durham
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In contrast to the empirical literature's focus on foreign direct investment (FDI), this study examines the effects of foreign portfolio investment (FPI) and “other” foreign investment (OFI) on economic growth using data on 88 countries from 1977 through 2000. Most measures suggest that FPI has no effect, and some results indicate that OFI has a negative impact on growth that is somewhat mitigated by initial financial and/or legal development. However, these results are questionable due to possible simultaneity bias. The empirical analyses also examine whether non-FDI foreign investment affects growth indirectly. FPI does not correlate positively with macroeconomic volatility, but the results indicate that the negative indirect effect of OFI through macroeconomic volatility comprises a substantial portion of the gross negative effect of OFI on growth.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

6144. Was There Front Running During the LTCM Crisis?

Author:
Fang Cai
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper uses a unique dataset of audit trail transactions to examine the trading behavior of market makers in the Treasury bond futures market when Long-Term Capital Management (LTCM) faced binding margin constraints in 1998. Although identities are concealed in the dataset, I find strong evidence that during the crisis market makers in the aggregate engaged in front running against customer orders from a particular clearing firm (coded “PI7”) that closely match various features of LTCM's trades through Bear Stearns. That is, market makers traded on their own accounts in the same direction as PI7 customers did, but one or two minutes beforehand. Furthermore, a significant percentage of market makers made abnormal profits on most of the trading days during the crisis. Their aggregate abnormal profits, however, were more than offset by abnormal losses realized after the private sector recapitalization of LTCM. Moreover, I show that before the rescue, a market maker's cumulative abnormal profit was positively correlated both to her tie as contra party with PI7 and to the intensity of her front running, but these relationships turned negative after the rescue. The overall evidence suggests that the recapitalization plan effectively relaxed LTCM's binding constraints and therefore reversed the profitability of front running.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States

6145. Transmission of Information Across International Equity Markets

Author:
Jon Wongswan
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper provides evidence of transmission of information from the U.S. and Japan to Korean and Thai equity markets during the period from 1995 through 2000. Information is defined as important macroeconomic announcements in the U.S., Japan, Korea, and Thailand. Using high-frequency intraday data, I focus the study on return volatility and trading volume because the implications of new information are much clearer than for returns. I find a large and significant association between emerging-economy equity volatility and trading volume and developed-economy macroeconomic announcements at short-time horizons. This is the first strong evidence of this sort of international information transmission. Previous studies' findings of at most weak evidence may be due to their use of lower frequency data and their focus on developed-economy financial market innovations as the measure of information.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, Japan, Asia, Korea, and Thailand

6146. National Strategy for Combating Terrorism

Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The terrorist attacks of September 11, 2001, in Washington, D.C., New York City, and Pennsylvania were acts of war against the United States of America and its allies, and against the very idea of civilized society. No cause justifies terrorism. The world must respond and fight this evil that is intent on threatening and destroying our basic freedoms and our way of life. Freedom and fear are at war.
Topic:
Security, Defense Policy, and Terrorism
Political Geography:
United States, Washington, and Pennsylvania

6147. Annual Industrial Capabilities Report to Congress

Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Section 2504 of title 10, United States Code, requires that the Secretary of Defense submit an annual report to the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives, by March 1st of each year.
Topic:
Defense Policy, Economics, Industrial Policy, and Science and Technology
Political Geography:
United States

6148. Consumption, Durable Goods, and Transaction Costs

Author:
Robert F. Martin
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We study consumption of durable and nondurable goods when the durable good is subject to transaction costs. In the model, agents derive utility from a service flow of a durable good and a consumption flow of a nondurable good. The key feature of the model is the existence of a fixed transaction cost in the durable good market. The fixed cost induces an inaction region in the purchase of the durable good. More importantly, the inability to adjust the durable stock induces variation in consumption of the nondurable good over the inaction region. The variation is a function of the degree of complementarity between durable and nondurable goods in the period utility function, the rate of intertemporal substitution, and a precautionary motive induced by incomplete markets. We test the model using the PSID. Housing serves as the durable good. The data indicate an increase in consumption before moving to a smaller house and a decrease in consumption before moving to a larger house. This result is consistent with the model when there exists complementarity between the durable and nondurable good or when there is a strong precautionary effect.
Topic:
Economics, Industrial Policy, and International Trade and Finance
Political Geography:
United States

6149. Diversification, Original Sin, and International Bond Portfolios

Author:
Francis E. Warnock and John D. Burger
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
While there is a severe home bias in U.S. investors' foreign bond portfolios, we find that portfolio weights are greater for countries with more open capital accounts and whose bond returns are less correlated with U.S. returns. Positions in local-currency-denominated bonds are particularly sensitive to past and prospective returns volatility. An analysis of changes in portfolio weights over time indicates that U.S. investors have recently moved out of smaller markets and those with low and declining credit ratings. Our data also allow for an analysis of the size and currency composition of international bond markets. We find that countries with stronger institutions and better inflation performance have larger local currency bond markets. An implication for developing countries is that creditor friendly policies, such as vigilance on the inflation front and the development of strong institutions, can enable local bond market development and may in turn attract global investors.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

6150. Long-Run Supply Effects and the Elasticities Approach to Trade

Author:
Joseph E. Gagnon
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Krugman (1989) argued that differences across countries in estimated income elasticities of import demand are due to omission of an exporter supply effect. He showed that such an effect can be derived in a theoretical model with economies of scale in production and a taste for variety in consumption. In his model, countries grow by producing new varieties of goods, and they are able to export these goods without suffering any deterioration in their terms of trade. This paper analyzes U.S. import demand from different source countries and finds strong evidence of a supply effect of roughly half the magnitude (0.75) of the income elasticity (1.5). Price elasticities for the most part are estimated close to -1, which is typical for the literature. Exclusion of the supply effect leads to overestimation of the income elasticity. Results based on U.S. exports to different destinations are less robust, but largely corroborate these findings.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States