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921. Economic Survey of Ireland, 2006

Publication Date:
03-2006
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Ireland has continued its exemplary economic performance, attaining some of the highest growth rates in the OECD. After a remarkable decade, per-capita income has caught up with and overtaken the EU average. Further progress will require strong productivity growth and continued increases in labour supply. These challenges are familiar to most OECD economies. But it also faces some issues that are less common: it is going through a transition phase in upgrading its social services; infrastructure levels need to catch up with the boom in activity and population that has occurred over this period; and it has to manage some sizeable macroeconomic risks.
Topic:
Development, Economics, and Markets
Political Geography:
Europe and Ireland

922. Globalization, Private Security, and Democratic Processes: Implications for the Democratic Peace?

Author:
Deborah Avant
Publication Date:
11-2006
Content Type:
Working Paper
Institution:
Centre for International Peace and Security Studies
Abstract:
During the 1990s and into this century, a robust market for force emerged alongside and intertwined with state military forces. The rise of stateless forces associated with globalization is often seen as breaking down barriers between states and enhancing the prospects for peace, particularly among advanced democracies. Stateless forces, in particular marketbased security, may also, however, alter the functioning of democracies. A widely held, albeit often implicit, assumption of much theory and research in international relations, especially in the literature on the democratic peace, is that states rely on their own military organizations rather than hired guns to project force. The question addressed here is whether the attributes that have been identified as promoting trust among democracies remain strong when states rely on private forces instead of, or in addition to, public ones. If greater reliance on the market to satisfy security needs affects the transparency, constitutionalism and public consent of their foreign policy processes, the market for force could have implications for trust among democracies – and at the extreme, perhaps even for the democratic peace. Overall, we conclude that the use of private security by the US threatens to weaken key institutional mechanisms taken to enhance trust between it and other democracies.
Topic:
Democratization, Economics, Globalization, and Markets
Political Geography:
United States

923. Flying Geese or Sitting Ducks: China's Impact on the Trading Fortunes of other Asian Economies

Author:
Alan J. Ahearne, John G. Fernald, John W. Schindler, and Prakash Loungani
Publication Date:
12-2006
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange rates matter for export performance, the income growth of trading partners matters far more. This suggests the potential for exports of all Asian economies to grow in harmony as long as global growth is strong. We also examine changes in export shares of Asian economies to the U.S. market and find evidence that dramatic changes in shares are taking place. Many of these changes are consistent with a 'flying geese' pattern in which China moves into the product space vacated by the Asian NIEs or with greater integration of trade across Asia in the production of final goods. Nevertheless, China's dramatic gains in recent years do increase the pressure on Asian economies, particularly in ASEAN and South Asia, to seek areas of comparative advantage.
Topic:
Development, Economics, Foreign Exchange, International Trade and Finance, and Markets
Political Geography:
China, South Asia, and Asia

924. Predicting Sharp Depreciations in Industrial Country Exchange Rates

Author:
Jonathan H. Wright and Joseph E. Gagnon
Publication Date:
11-2006
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper considers the prediction of large depreciations (both nominal and real) in a panel of industrialized countries using a probit methodology. The current account balance/GDP ratio has a modest but statistically significant effect on the estimated probability of a large depreciation, and gives slight predictive power in an outof- sample forecasting exercise. The CPI inflation rate also has a modest but statistically significant effect in predicting nominal depreciations and has slight predictive power, but this effect is not present for real exchange rates. The GDP growth rate occasionally has a significant effect. A higher current account balance (surplus) tends to reduce the probability of a sharp depreciation; a higher inflation rate tends to increase the probability of a sharp depreciation; and a higher GDP growth rate perhaps tends to reduce the probability of a sharp depreciation.
Topic:
Economics, Foreign Exchange, International Trade and Finance, and Markets

925. Real-Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets

Author:
Torben G. Andersen, Tim Bollerslev, Francis X. Diebold, and Clara Vega
Publication Date:
09-2006
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. Equity markets, moreover, react differently to news depending on the stage of the business cycle, which explains the low correlation between stock and bond returns when averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most strongly to macroeconomic news; in particular, when conditioning on the state of the economy, the equity and foreign exchange markets appear equally responsive. Finally, we also document important contemporaneous links across all markets and countries, even after controlling for the effects of macroeconomic news.
Topic:
Economics, Foreign Exchange, International Trade and Finance, and Markets
Political Geography:
United States

926. The U.S. Current Account Deficit and the Expected Share of World Output

Author:
John H. Rogers and Charles Engel
Publication Date:
04-2006
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We investigate the possibility that the large current account deficits of the U.S. are the outcome of optimizing behavior. We develop a simple long-run world equilibrium model in which a country's current account is determined by the expected discounted present value of its future share of world GDP relative to its current share of world GDP. The model suggests that under some reasonable assumptions about future U.S. GDP growth relative to the rest of the advanced countries – more modest than the growth over the past 20 years – the current account deficit is near optimal levels. We then explore the implications for the real exchange rate. Under some plausible assumptions, the model implies little change in the real exchange rate over the adjustment path, though the conclusion is sensitive to assumptions about tastes and technology. Then we turn to empirical evidence. Two empirical analyses of current account sustainability using actual data suggest that the U.S. is not keeping on a long-run sustainable path. One is a direct test of our model, which finds that the dynamics of the U.S. current account – the increasing deficits over the past decade – are difficult to explain under a particular statistical model (Markov-switching) of expectations of future U.S. growth. But, if we use survey data on forecasted GDP growth in the G7, our very simple model appears to explain the evolution of the U.S. current account remarkably well. We conclude that expectations of robust performance of the U.S. economy relative to the rest of the advanced countries is a contender – though not the only legitimate contender – for explaining the U.S. current account deficit.
Topic:
Economics, Foreign Exchange, International Trade and Finance, and Markets
Political Geography:
United States

927. Understanding South Korea and Japan's Spectacular Broadband Development: Strategic Liberalization of the Telecommunications Sectors

Author:
Seung-Youn Oh and Kenji Kushida
Publication Date:
06-2006
Content Type:
Working Paper
Institution:
Berkeley Roundtable on the International Economy
Abstract:
The ICT sectors of both South Korea and Japan developed rapidly, especially in developing high-speed, low priced broadband services. These networks can potentially provide both economies with new playgrounds for experimentation and innovation. Existing explanations of how these broadband networks and services were created tend to be confused and contradictory regarding 1) the roles played by the states, 2) the exact mechanisms of interaction between governments policies and programs, regulatory frameworks, and market dynamics, and 3) the politics driving each of the state-market interactions.
Topic:
International Political Economy and Markets
Political Geography:
Japan, Asia, and South Korea

928. Markets As Conversations: Markets' Contribution To Civility, The Public Sphere And Civil Society At Large

Author:
Victor Pérez-Diaz
Publication Date:
12-2006
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
The author restates a traditional, broad and composite view of civil society, of increasing relevance at a time of ever greater complexity in a non-state centered world; and he explores the relations between markets, associations and politics as parts of that interconnected whole. Markets as conversations shape people's dispositions and help developing a set of civil and civic virtues, bracketed together under the rubric of civility. The paper examines the scope and limits of these civilizing effects on politics and the public sphere.
Topic:
Civil Society, Development, Economics, and Markets

929. Natural Unemployment, the Role of Monetary Policy and Wage Bargaining: A Theoretical Perspective

Author:
Stefan Collignon
Publication Date:
05-2006
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
This paper models unemployment as a general equilibrium solution in labor and capital markets, while the natural rate hypothesis explains unemployment simply as a partial equilibrium in the labor market. It is shown that monetary policy can have long-run effects by affecting required returns on capital and investment. If monetary policy is primarily concerned with maintaining price stability, the interaction between wage bargaining and the central bank's credibility as an inflation fighter becomes a crucial factor in determining employment. Different labor market institutions condition different monetary policy reactions. With centralized wage bargaining, a central bank mandate focusing primarily on price stability is sufficient. With an atomistic labor market, the central bank must also consider output as a policy objective.
Topic:
Civil Society, Development, Economics, and Markets
Political Geography:
United States, United Kingdom, and Europe

930. Microfinance as Business

Author:
David Roodman and Uzma Qureshi
Publication Date:
11-2006
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
IN THIS PAPER, we analyze microfinance institutions (MFIs) as businesses, asking how some MFIs succeed in reducing and covering costs, earning returns, attracting capital, and scaling up. We are interested in MFIs that are financially self-sufficient (covering the cost of daily operations as well as the cost of capital at a commercial rate) or merely operationally self-sufficient (not covering capital costs) or only, say, 90% operationally self-sufficient. All such MFIs strive for efficiency and are in many respects businesslike.
Topic:
Civil Society, Development, Economics, and Markets