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3061. NATO and the Economic and Financial Crisis

Author:
Keith Hartley and Binyam Solomon
Publication Date:
10-2009
Content Type:
Working Paper
Institution:
NATO Defense College
Abstract:
These is some consensus among economic forecasters and international economic organizations that the world economy is stabilizing after the worst global contraction since the end of the Second World War. While it is difficult to ascertain empirically whether the massive fiscal policy support played a role or not, the improving credit conditions and the return of demand in the housing market in North America and the UK point to some evidence that the stimulus is providing the necessary short-term boost. Nonetheless, there remain significant challenges that may constrain a quick recovery including the decline in household wealth (debt-laden consumers rebuilding their savings), persistent unemployment and deleveraging (decreasing the amount of debt a firm holds by paying it off) in the financial system together with future long-term prospects of inflation.
Topic:
Economics, International Trade and Finance, and Financial Crisis
Political Geography:
United Kingdom and North America

3062. An assessment of crime related risks in the Sahel

Author:
Laurence Ammour
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
NATO Defense College
Abstract:
The Sahel, a vast belt of land covering nine million square kilometers and encompassing ten countries, has always been a transit area for constant flows of people, trade, finance and religious groups. For the past twenty years, organized crime has had ample opportunity to develop here, either by using traditional networks or by taking over areas where there is no state control. It is also a region afflicted by perennial crises and weakened states, notwithstanding its undeniable strategic importance arising from its natural resources: oil, gold, phosphates, diamonds, copper, iron, coal, nickel, zinc, bauxite, uranium, plutonium, manganese, cobalt, silver, chrome and precious timbers.
Topic:
Crime, Economics, Natural Resources, and Fragile/Failed State
Political Geography:
Africa

3063. Governance Challenges and the Financial Crisis: Seven Key Questions

Author:
Terry F. Buss and Lois Fu
Publication Date:
06-2009
Content Type:
Working Paper
Institution:
The National Academy of Public Administration
Abstract:
We are in the midst of a global economic crisis. The federal government has responded on an unprecedented scale and scope, with injections of trillions into financial markets, infusions of cash to troubled industries, state and local governments, and people in need. Government is employing tools in ways never befo re considered and inventing new tools, in the hope of stabilizing the economy and spurring economic recovery.
Topic:
Economics, International Trade and Finance, Financial Crisis, Governance, and Reform

3064. The Taylor Rule and Interval Forecast For Exchange Rates

Author:
Jian Wang and Jason J. Wu
Publication Date:
01-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper attacks the Meese-Rogoff (exchange rate disconnect) puzzle from a different perspective: out-of-sample interval forecasting. Most studies in the literature focus on point forecasts. In this paper, we apply Robust Semi-parametric (RS) interval forecasting to a group of Taylor rule models. Forecast intervals for twelve OECD exchange rates are generated and modified tests of Giacomini and White (2006) are conducted to compare the performance of Taylor rule models and the random walk. Our contribution is twofold. First, we find that in general, Taylor rule models generate tighter forecast intervals than the random walk, given that their intervals cover out-of-sample exchange rate realizations equally well. This result is more pronounced at longer horizons. Our results suggest a connection between exchange rates and economic fundamentals: economic variables contain information useful in forecasting the distributions of exchange rates. The benchmark Taylor rule model is also found to perform better than the monetary and PPP models. Second, the inference framework proposed in this paper for forecast-interval evaluation can be applied in a broader context, such as inflation forecasting, not just to the models and interval forecasting methods used in this paper.
Topic:
Economics, Exchange Rate Policy, and Models
Political Geography:
Global Focus

3065. Currency Crashes in Industrial Countries: Much Ado About Nothing?

Author:
Joseph Gagnon
Publication Date:
02-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Sharp exchange rate depreciations, or currency crashes, are associated with poor economic outcomes in industrial countries only when they are caused by inflationary macroeconomic policies. Moreover, the poor outcomes are attributable to inflationary policies in general and not the currency crashes in particular. On the other hand, crashes caused by rising unemployment or external deficits have always had good economic consequences with stable or falling inflation rates.
Topic:
Economics, Exchange Rate Policy, Inflation, and Currency
Political Geography:
Global Focus

3066. Border Prices and Retail Prices

Author:
David Berger, Jon Faust, John H. Rogers, and Kai Steverson
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We analyze retail prices and at-the-dock (import) prices of speciÖc items in the Bureau of Labor Statisticsí(BLS) CPI and IPP databases, using both databases simultaneously to identify items that are identical in description at the dock and when sold at retail. This identiÖcation allows us to measure the distribution wedge associated with bringing traded goods from the point of entry into the United States to their retail outlet. We Önd that overall U.S. distribution wedges are 50-70%, around 10 to 20 percentage points higher than that reported in the literature. We discuss the implications of this for measuring the size of the "pure" tradeables sector, exchange rate pass-through, and real exchange rate determination. We Önd that distribution wedges are very stable over time but there is considerable variation across items. There is some variation across the country of origin for the imported item, for our major trading partners, but not as much as the cross-item variation. We also investigate the determinants of distribution wedges, Önding that wedges do not vary systematically with exchange rates, but are related to other features of the micro data.
Topic:
Economics and Exchange Rate Policy
Political Geography:
Global Focus

3067. South Africa's Post-Apartheid Two-Step: Social Demands versus Macro Stability

Author:
Brahima Coulibaly and Trevon Logan
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
During Apartheid, there was little need for redistributional policies or to borrow for public works since the vast majority of the population was underserved. With the arrival of a representative democracy in 1994, however, South Africa faced a unique problem-- providing new and improved public services for the majority of its citizens while at the same time ensuring that filling this void would not undermine macroeconomic stability. Over the past fifteen years, policy makers have achieved macrostability, but progress on social needs has been below expectations and South Africa continues to lag behind its peers. This paper reviews the progress made so far and examines the challenges ahead for the upcoming administration. Our analysis suggest an increase in skill formation as a possible solution to the policy dilemma of fullfilling the outsized social demands while maintaining macrostability.
Topic:
Apartheid, Economics, Political stability, and Welfare
Political Geography:
Africa, South Africa, and Southern Africa

3068. Are Chinese Exports Sensitive to Changes in the Exchange Rate?

Author:
Shaghil Ahmed
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper builds a model of two types of Chinese exports, those processed and assembled laregely from imported inputs ("processed" exports) and "non- processed" exports. Based on this model, the sensitivity of Chinese exports to exchange rate changes is empirically examined. Unlike previous work, the estimation period includes the net real appreciation of the renminbi that has occurredoverthepastthreeyears. Theresultsshowthatgreaterexchangerate appreciation dampens export growth, both for non-processed and processed ex- ports, with the estimated cumulative price elasticity being substantially greater thanunity. WhenthesourceoftheincreaseintheChineserealexchangerateis appreciations against the currencies of other emerging Asian trading partners, the e§ect on processing exports is positive but insignÖcant, while the e§ect on non-processing exports is signiÖcantly negative. By contrast, when the source of the increase in the Chinese real exchange rate is appreciation against Chinaís advanced-economy trading partners, the e§ects on both types of exports are negative. These results are consistent with the predictions of the theoretical model. Counterfactualsimulationsbasedontheestimatedmodelstronglysug- gest that if the trade-weighted real renminbi had appreciated at an annual rate of 10 percent per quarter since mid-2005, Chinese real exports would have been roughly 30 percent lower today. Thus greater exchange rate áexibility could contribute to lowering Chinaís huge trade surplus through restraining growth of exports.
Topic:
Economics, International Trade and Finance, Exchange Rate Policy, and Exports
Political Geography:
China and Asia

3069. Labor Market Search in Emerging Economies

Author:
Emine Boz, Ceyhun Bora Durdu, and Nan Li
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper shows that labor markets of emerging economies are characterized by large fluctuations in wages while employment fluctuations are subdued. We find that a real business cycle model of a small open economy that embeds a Mortensen-Pissarides type of search-matching frictions can account for these aforementioned regularities. Moreover, the joint interaction of countercyclical interest rates and search-matching frictions can go a long way in accounting for higher consumption variability relative to output and countercyclical current account observed in emerging markets. Extending this baseline model to incorporate procyclical variations in the technical efficiency at which matches are generated, the model can match the unemployment variability observed in the data.
Topic:
Economics, Emerging Markets, and Labor Issues
Political Geography:
Global Focus

3070. Income Per Natural: Measuring Development for People rather than Places - Working Paper 143

Author:
Michael Clemens and Lant Pritchett
Publication Date:
03-2008
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
It is easy to learn the average income of a resident of El Salvador or Albania. But there is no systematic source of information on the average income of a Salvadoran or Albanian. We create a first estimate a new statistic: income per natural—the mean annual income of persons born in a given country, regardless of where that person now resides. If income per capita has any interpretation as a welfare measure, exclusive focus on the nationally resident population can lead to substantial errors of the income of the natural population for countries where emigration is an important path to greater welfare. The estimates differ substantially from traditional measures of GDP or GNI per resident, and not just for a handful of tiny countries. Almost 43 million people live in a group of countries whose income per natural collectively is 50% higher than GDP per resident. For 1.1 billion people the difference exceeds 10%. We also show that poverty estimates are very different for national residents and naturals; for example, 26 percent of Haitian naturals who are not poor by the two-dollar-a-day standard live in the United States. These estimates are simply descriptive statistics and do not depend on any assumptions about how much of observed income differences across naturals is selection and how much is a pure location effect. Our conservative, if rough, estimate is that three quarters of this difference represents the effect of international migration on income per natural. This means that departing one's country of birth is today one of the most important sources of poverty reduction for a large portion of the developing world. If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development.
Topic:
Demographics, Development, Economics, Migration, Poverty, and Population
Political Geography:
United States and Albania