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321. Empirical Investigations of Inflation Targeting

Author:
Yifan Hu
Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
A growing number of countries have anchored their monetary policy to an explicit numerical rate or range of inflation since such an inflation targeting framework was first adopted by New Zealand in 1989. This paper empirically investigates issues associated with inflation targeting using a dataset of 66 countries for the 1980–2000 period.
Topic:
Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:
New Zealand

322. Enron's Missed Opportunity: Enron's Refusal to Build a Collaborative Market Turned Bandwidth Trading Into a Disaster

Author:
Andrew Schwartz
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
Why did Enron fail? The easy answer is that Enron was a fraud, a Ponzi scheme designed to enrich scoundrels. But beneath the off-balance sheet transactions and partnerships that have drawn such intense scrutiny, Enron's efforts to reduce complex products into tradable commodities represented one of the most promising ideas of the past twenty-five years. Enron's failure was due in part to a business strategy that regarded competitors as ruthless and uncompromising. That mentality led the company to reject the very real possibility that rivals could, working together, create the new markets that in turn would open up profit opportunities for all. Enron's brilliant vision of the New Economy didn't go far enough; it required a New Economy business model that emphasized cooperation among competitors.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States

323. Fundusz Mikro An Experiment In Partnership–Based Microfinance 1998 – 2002.

Author:
Witold Szwajkowski
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Aspen Institute
Abstract:
Fundusz Mikro's evolution has to be understood in the context of Poland's emergence from communism during the 1990s. For businesses, the challenge of that time was not merely to learn new skills, but to unlearn old habits and attitudes while at the same time taking on new ones appropriate to a market economy. Because of this shift, Fundusz Mikro (FM) found that it had to do more than lend money; it had to learn to play a more pro-active role in changing the culture in which business took place. The financial crisis of1998 and the harder economic times since then were an added incentive for FM to adapt its approach, products, and finally its mission.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Europe and Poland

324. South Korea, a new model for the new economy?

Author:
Christian Milelli
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Centre d'Etudes et de Recherches Internationales (CERI)
Abstract:
The "new economy" in South Korea rhymes with the Internet. In 2003, the "land of morning calm" has actually become the most connected country in the world. The present study tackles this phenomenon from a number of angles. The Internet is not only considered as a physical network but a lever of transformation of the country's economic and social life. Although the role of the state has been decisive and remains focal, it is not enough to explain the extreme rapidity with which the new electronic medium spread, which is due to a broad range of causes. The Korean experience differs from former ones in that it extends well beyond the market sphere (ecommerce) to areas such as education, volunteer associations and even politics. The emergence of a national dimension constitutes another characteristic that at first seems paradoxical, since the Internet is so universal in scope. Yet observation of the evolution of Internet traffic on the national level confirms this trend. South Korea is far from an exceptional case in Asia, but the country has taken the lead over its neighbors, becoming a new "model." Beyond these singular features, the Korean experience in the use of the Internet again demonstrates that a global "information revolution" – in other words, a process that is quickly reshaping the material bases of an entire society – is underway.
Topic:
Development, Economics, and Emerging Markets
Political Geography:
Asia and South Korea

325. Bankers into Brokers: The Structural Transformation and Opening of Mexico's Financial Markets

Author:
Susan Minushkin
Publication Date:
03-2003
Content Type:
Working Paper
Institution:
Centro de Investigación y Docencia Económicas
Abstract:
Mexico's financial market opening demonstrates how this domestic logic interacts with international condition. The following case study of Mexican financial opening makes the following contentions. First, financial market opening in Mexico did not begin in the 1980s, as commonly believed. Rather the process has its roots in a conflict among sub-sectors of the financial services industry, between powerful oligarchic bankers (banqueros) and financial entrepreneurs based on the bolsa (bolseros). The conflict, dating from the 1960s, was a purely domestic affair and was not the result of increased international capital mobility and financial marked opening in OECD countries. Nevertheless, this conflict led to a structural change in the financial service industry congruent with changes in the international financial system from bank-based financing to increasing securities market-based financing.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
North America and Mexico

326. Economic Conditions, Democracy and the IMF

Author:
Susan Minushkin
Publication Date:
03-2003
Content Type:
Working Paper
Institution:
Centro de Investigación y Docencia Económicas
Abstract:
This study seeks to test the hypotheses that different styles of financial market opening can be explained, in part, by general economic conditions and the need to attract external capital. It seeks, as well, to test the some for the more general arguments advanced in the financial market opening literature that financial market opening is a result of a country's increased participation in the international financial system and increased international trade integration. Two specifically political arguments also are tested. The first is that emerging markets opened their markets in response to pressure from the IMF. The second is that there is an association between political freedom and open markets. I test these hypotheses using regression analyses of panel data from a sample of emerging market countries.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Europe and North America

327. The Mirage of Exchange Rate Regimes in Emerging Market Countries

Author:
Frederic Mishkin and Guillermo Calvo
Publication Date:
11-2003
Content Type:
Working Paper
Institution:
European Union Studies Center
Abstract:
This paper argues that much of the debate on choosing an exchange rate regime misses the boat. It begins by discussing the standard theory of choice between exchange rate regimes, and then explores the weaknesses in this theory, especially when it is applied to emerging market economies. It then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates, and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits. The conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal, financial, and monetary institutions in producing macroeconomic success in emerging market countries. This suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable, and more on these deeper institutional arrangements. A focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years.
Topic:
Economics, Emerging Markets, and International Trade and Finance

328. China and Emerging Asia: Comrades or Competitors?

Author:
John W. Schindler, John G. Fernald, Prakash Loungani, and Alan J. Ahearne
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Do increases in China's exports reduce exports of other emerging Asian economies? We find that correlations between Chinese export growth and that of other emerging Asian economies are actually positive (though usually not significant), even after controlling for trading-partner income growth and real effective exchange rates. We also present results from a VAR estimation of aggregate trade equations on the relative importance of foreign income and exchange rates in determining Asian export growth. Although exchange rates do matter for export performance, the income growth of trading partners matters even more. In addition, we examine specific products and find evidence that a considerable shifting of trade patterns is taking place, consistent with a 'flying geese' pattern in which China and ASEAN-4 move into the product space vacated by the NIEs. Our results suggest that China and emerging Asia are both comrades (overall) and competitors (in specific products).
Topic:
Economics and Emerging Markets
Political Geography:
China and Asia

329. Precautionary Savings and the Wealth Distribution with Illiquid Durables

Author:
Joseph W. Gruber and Robert F. Martin
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We study the role an illiquid durable consumption good plays in determining the level of precautionary savings and the distribution of wealth in a standard Aiyagari model (i.e. a model with heterogeneous agents, idiosyncratic uncertainty, and borrowing constraints). Transactions costs induce an inaction region over which the durable stock and the associated user cost are not adjusted in response to changes in income, increasing, on average, the volatility of non-durable consumption. The volatility of total consumption is then a function of the share of the durable good in the utility function and the width of the inaction region. We are particularly interested in parameterizations which increase the precautionary motive for saving through an increase in "committed expenditure risk." We find, for an empirically relevant share of durable consumption and for all transaction costs below an upper threshold, that the level of precautionary savings is increasing in the transaction costs. Transaction costs have only a modest impact on the degree of wealth dispersion, as measured by the Gini index, as the associated increase in savings is close to linear in wealth. While we are unable to match the dispersion of wealth in the data, we increase the dispersion over a single asset model (Gini index of .71 for financial assets and .37 for total wealth) and we are able to match the relative dispersion of financial to durable assets, i.e. we find financial assets much more unequal than durable assets. We also match the ratio of housing wealth to total wealth for the median agent. We calibrate the model to data from the PSID, the CES, and the SCF.
Topic:
Economics, Emerging Markets, International Trade and Finance, and Science and Technology

330. Loans to Japanese Borrowers

Author:
David C. Smith
Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines the characteristics of loans to Japanese borrowers using a relatively unexplored, contract-specific data set. I find that Japanese banks charge less on loans to Japanese borrowers than do foreign banks, holding constant many of the risk characteristics of the borrower. Moreover, Japanese banks vary pricing less across these risks than do foreign banks, suggesting that Japanese banks tend not to distinguish good risks from bad. Taken together, the results suggest that problems at Japanese banks stem from the behavior of the banks themselves, not simply from poor economic conditions. I also document a significant shortening in the maturity structure of Japanese loans in the late 1990s.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Japan and Israel