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151. Amérique latine. Political Outlook 2011

Author:
Mathilde Arrigoni, Cecilia Baeza, Ernesto Zadillo Ponce de Léon, Doris Buu-Sao, Maya Colombo, Olivier Dabène, Marie Doucey, Guillaume Fontaine, Marie-Laure Geoffray, Erica Guevara, Marie-Esther Lacuisse, Thierry Noël, Kevin Parthenay, Gustavo Pastor, Camila Minerva Rodriguez Tavárez, and Adriana Urrutia
Publication Date:
12-2011
Content Type:
Special Report
Institution:
Centre d'Etudes et de Recherches Internationales
Abstract:
Le Political Outlook 2011 de l’Amérique latine est une publication de l’Observatoire politique de l’Amérique latine et des Caraïbes (Opalc) du CERI-Sciences Po. Il prolonge la démarche du site www. opalc.org en offrant des clefs de compréhension d’un continent en proie à des transformations profondes. Des informations complémentaires à cette publication sont disponibles sur le site.
Topic:
Markets, Political Economy, Politics, History, Governance, and Finance
Political Geography:
Cuba, Latin America, Nicaragua, Caribbean, Haiti, and Chile

152. The Technocratic Trajectory and Political Instability of Mauritania, 2003-2011 (Trajectoire technocratique et instabilité politique en Mauritanie, 2003-2011)

Author:
Boris Samuel
Publication Date:
10-2011
Content Type:
Special Report
Institution:
Centre d'Etudes et de Recherches Internationales
Abstract:
In 2004 the government of Mauritania admitted that for the past ten years its national macroeconomic and financial data had been falsified. This admission revealed a small part of the fraudulent practices that took place during the Taya era which ended in 2005. But it also showed that the economic management of this "good student" had become ensnared in true "bureaucratic anarchy". Beginning in 2005, when the democratic transition should have enabled the public administration's house to be put in order, reforms were often motivated by a desire to improve the image of the regime and were thus less than effective. Then, following the elections of 2007, and in the midst of financial scandals, the government developed a technocratic approach which alienated the Mauritanian public who perceived a power vacuum. A new coup d'etat occurred during the summer of 2008. The "Rectification Movement" of general Abdel Aziz acquired legitimacy as a result of its fight against terrorism in Sahel. Employing populist rhetoric and adopting the moral high ground in the fight against rampant corruption, the Movement favored lax management of resources and tight, even authoritarian, control of public finances.
Topic:
Corruption, Markets, Political Economy, Finance, and State
Political Geography:
West Africa and Mauritania

153. Constructive Data Mining: Modeling Argentine Broad Money Demand

Author:
Neil R. Ericsson and Steven B. Kamin
Publication Date:
09-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
his paper assesses the empirical merits of PcGets and Autometrics–two recent algorithms for computer-automated model selection–using them to improve upon Kamin and Ericsson’s (1993) model of Argentine broad money demand. The selected model is an economically sensible and statistically satisfactory error correc- tion model, in which cointegration between money, inflation, the interest rate, and exchange rate depreciation depends on the inclusion of a “ratchet” variable that cap- tures irreversible effects of inflation. Short-run dynamics differ markedly from the long run. Algorithmically based model selection complements opportunities for the researcher to contribute value added in the empirical analysis.
Topic:
Economics, Markets, Finance, and Inflation
Political Geography:
Argentina and South America

154. The Macroeconomic Effects of External Pressures on Monetary Policy

Author:
Davide Debortoli and Ricardo Nunes
Publication Date:
09-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Central banks, whether independent or not, may occasionally be subject to external pressures to change policy objectives. We analyze the optimal response of central banks to such pressures and the resulting macroeconomic consequences. We consider several alternative scenarios regarding policy ob- jectives, the degree of commitment and the timing of external pressures. The possibility to adopt “more liberal” objectives in the future increases current inflation through an accommodation effect. Simultaneously, the central bank tries to anchor inflation by promising to be even “more conservative” in the future. The immediate effect is an output contraction, the opposite of what the pressures to adopt “more liberal” objectives may be aiming. We also discuss the opposite case, where objectives may become “more conservative” in the future, which may be the relevant case for countries considering the adoption of inflation targeting.
Topic:
Finance, Banks, Inflation, and Central Bank
Political Geography:
Global Focus

155. Exchange Rates and Fundamentals: A Generalization

Author:
James M. Nason and John H. Rogers
Publication Date:
09-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Exchange rates have raised the ire of economists for more than 20 years. The problem is that few, if any, exchange rate models are known to systematically beat a naive random walk in out of sample forecasts. Engel and West (2005) show that these failures can be explained by the standard-present value model (PVM) because it predicts random walk exchange rate dynamics if the discount factor approaches one and fundamentals have a unit root. This paper generalizes the Engel and West (EW) hypothesis to the larger class of open economy dynamic stochastic general equilibrium (DSGE) models. The EW hypothesis is shown to hold for a canonical open economy DSGE model. We show that all the predictions of the standard-PVM carry over to the DSGE-PVM. The DSGE-PVM also yields an unobserved components (UC) models that we estimate using Bayesian methods and a quarterly Canadian--U.S. sample. Bayesian model evaluation reveals that the data support a UC model that calibrates the discount factor to one implying the Canadian dollar--U.S. dollar exchange rate is a random walk dominated by permanent cross-country monetary and productivity shocks.
Topic:
Economics, Finance, and Exchange Rate Policy
Political Geography:
Global Focus

156. Expected Consumption Growth from Cross-Country Surveys: Implications for Assessing International Capital Markets

Author:
Charles Engel and John H. Rogers
Publication Date:
09-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Survey data show that the expected growth rates of consumption across countries vary widely and are not highly correlated. This data contradicts the simplest of open-economy models in which there is a freely traded non- state-contingent bond and purchasing power parity holds. We explore two alternative explanations for the finding: that households in each country in effect face different ex ante real interest rates or that there are significant credit constraints, so that expected consumption growth rates are driven largely by expected income growth. The empirical evidence strongly supports the latter hypothesis. These findings challenge the modeling of consumption that is at the heart of many, if not most, macroeconomic models.
Topic:
Economics, Finance, Interest Rates, and Credit
Political Geography:
Global Focus

157. Soft Information in Earnings Announcements: News or Noise?

Author:
Elizabeth Demers and Clara Vega
Publication Date:
10-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines whether the “soft” information contained in the text of management’s quarterly earnings press releases is incrementally informative over the company’s reported “hard” earnings news. We use Diction, a textual-analysis program, to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over the period 1998 to 2006 and document that unanticipated net optimism in managers’ language affects announcement period abnormal returns and predicts post- earnings announcement drift. We find that it takes longer for the market to understand the implications of soft information than those of hard information. We also find that the market response varies by firm size, turnover, media and analyst coverage, and the extent to which the standard accounting model captures the underlying economics of the firm. We also show that the second moment of soft information, the level of certainty in the text, is an important determinant of contemporaneous idiosyncratic volatility, and it predicts future idiosyncratic volatility.
Topic:
Economics and Finance
Political Geography:
Global Focus

158. The Economics and Culture of Financialisation

Author:
Jan Toporowski
Publication Date:
04-2008
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This paper examines some of the social, economic and political consequences of financial inflation for the activities of companies and the operations in debt markets of an increasingly financial middle class. In this paper ‘financialisation’ is broadly defined as the inflation of capital markets. The first section of the paper explains the Kalecki-Steindl theory of enforced company indebtedness in a middle-class society. The second section of the paper shows how financial inflation makes companies over- capitalised, resulting in a decline in the trend of long-term investment. The third section shows how forced company indebtedness is modified when the middle classes start to operate in inflating asset markets. A conclusion sketches out some of the consequences of this financialisation for politics, social policy, and moral and cultural attitudes.
Topic:
Culture, Finance, Social Policy, and Middle Class
Political Geography:
Global Focus