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691. EMU Effects on International Trade and Investment

Author:
Harry Flam and Per Jansson
Publication Date:
04-2000
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The partial effect of nominal exchange rate volatility on exports from each EMU member to the rest of the EMU is estimated on annual data for 1967-97, using modern time-series methods. The long-run relations between exchange rate volatility and exports are mostly negative and in several cases insignificantly different from zero. Thus, these estimates do not provide much support for the hypothesis that the elimination of nominal exchange rate volatility will significantly increase trade within the EMU. However, the EMU will presumably lead to geographical concentration of production and therefore indirectly to increased trade within the EMU and, during a transitional stage, to increased foreign direct investment, both within the EMU and between the EMU and the rest of the world.
Topic:
Economics, Government, International Political Economy, and International Trade and Finance
Political Geography:
Europe

692. The Impact of EMU on European Transition Economies

Author:
David Begg
Publication Date:
04-2000
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
An interesting theory of transition must give a convincing account of structural adjustment and supply side improvement. In this paper, I discuss the incentives for government to undertake costly supply side improvement and how these relate to incentives governing the design of monetary and fiscal policy during transition. The government cares about deviations of inflation, output and government spending from their ideal levels, is subject to a budget constraint in which inflation yields some real revenue, and recognizes the distortionary effects of excess levels of taxation. Costly structural adjustment enhances future output by reducing supply side distortions.
Topic:
Economics, Government, and International Political Economy
Political Geography:
Europe

693. EMU and the Developing Countries

Author:
Benjamin J. Cohen
Publication Date:
03-2000
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The purpose of this paper is to explore economic and political implications of Europe's Economic and Monetary Union (EMU) for developing countries. In strictly economics terms, influences will be communicated through both trade and financial channels. Economies in the developing world will be affected by changes in European growth rates as well as by EMU's impact on transaction costs and enterprise competitiveness within Europe; they will also be impacted by changes in the structure and efficiency of Europe's capital markets. Modifications may be anticipated in borrowing and investment practices at the private level as well as in reserve and debt-management policies at the official level. In political terms, developing countries will be most directly influences by the anticipated rivalry between Europe's new single currency, the euro, and the dollar, which will compel developing countries to reconsider their own national currency strategies. Three conclusions stand out. First, except for selected groups of countries with particularly close ties to the EU, most economic linkages appear marginal at best. It is much easier to enumerate possible channels of transmission than to find many that appear quantitatively significant. Second, among economic effects of EMU, financial channels seem to matter more than trade channels. And third, across the full range of possible linkages, the most lasting influences for developing countries may well turn out, notably, to be political rather than either trade or financial. Significant changes are likely in exchange-rates regimes in many parts of the developing world.
Topic:
Emerging Markets, Government, and International Political Economy
Political Geography:
Europe

694. Will the Euro Trigger More Monetary Unions in Africa?

Author:
Patrick Honohan and Philip R. Lane
Publication Date:
03-2000
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We analyse the prospects for greater monetary integration in Africa, in the wake of EMU. We argue that the structural characteristics of African economies are quite different to the EMU members but that much can be gained from monetary cooperation, as an external agency of restraint and in promoting stability in the financial sector. EMU has only a marginal impact on the net benefits of monetary cooperation but the euro would be a natural anchor for any African monetary unions. Indeed, the most likely route to new monetary cooperation in Africa is via a common peg to the euro.
Topic:
Emerging Markets and International Political Economy
Political Geography:
Africa and Europe

695. Globalization, Marginalization and Development

Author:
S. Mansoob Murshed
Publication Date:
02-2000
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper surveys issues related to globalization, and the obstacles to the successful integration of vulnerable economies. For many developing countries, the positive benefits of the increased globalization that has been taking place since around 1980 remain distant and elusive. The economies of many countries in the developing world remain extremely vulnerable to domestic and external shocks. They have, effectively, become marginalized from the world system. To a great extent, the obstacles to the successful participation of vulnerable developing economies in the international system are rooted in the causes of their underdevelopment and poor economic performance. Nevertheless, the new rules of the game and the international economic environment prevalent since about 1980 following accelerated globalization, leaves them vulnerable in novel ways. Developing in the arrangements for conducting multilateral trade and technology transfer have left nations in the South more vulnerable than in the past. The ability to conduct independent macroeconomic policy is severely constrained. Nations are more reliant on volatile international capital markets, for finance and investment; many developing countries are completely eschewed by international private capital markets. The problem of poverty in many developing countries seems to have been exacerbated following globalization. When we consider the obstacles to the meaningful participation of vulnerable developing economies in the international system, many are domestic in origin, but external factors beyond the control of these countries play an important part as well. Among the former are poorly designed policies to promote growth on the supply-side, macroeconomic mismanagement on the aggregate demand side and institutional failure. In the latter category protectionist tendencies in the North are the most important factor. Many of these appear in the guise of concerns for environmental and labour standards. Globalization does, however, offer new possibilities to developing countries; particularly because shifts in the international division of labour, as well as technological innovations, could favour the South.
Topic:
Development, Emerging Markets, Globalization, International Political Economy, and Third World

696. Heterogeneity and Evolution of Expectations: a Model of Currency Crisis

Author:
Jasmina Arifovic and Paul Masson
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
A model of a portfolio allocation between mature and emerging markets is simulated with heterogeneous expectations, imitation, and experimentation. Solutions produce periodic crises. The predictions of the model are compared to a representative-agent, rational expectations model with multiple equilibria.
Topic:
Economics, International Political Economy, and International Trade and Finance

697. A Dollarization Blueprint for Argentina

Author:
Steve H. Hanke and Kurt Schuler
Publication Date:
03-1999
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
President Carlos Menem of Argentina has advocated replacing the Argentine peso with the dollar. Dollarization would benefit Argentina because it would eliminate the peso-dollar exchange-rate risk, lower interest rates, and stimulate economic growth.
Topic:
Economics and International Political Economy
Political Geography:
Argentina, South America, and Latin America

698. Safeguarding Prosperity in a Global Financial System The Future International Financial Architecture

Author:
Carla A. Hills, Peter G. Peterson, and Morris Goldstein
Publication Date:
10-1999
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Certain passages in the executive summary are italicized to highlight the task force's main findings and recommendations.
Topic:
Globalization, International Cooperation, International Organization, and International Political Economy

699. Independent Task Force Report: Reconstructing the Balkans

Author:
Charles A. Kupchan, Morton I. Abramowitz, and Albert Fishlow
Publication Date:
07-1999
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
The last of the six Balkan Wars of the twentieth century is over. But it is by no means certain that a durable peace is at hand. After vast death, destruction, and savagery lasting almost a decade can the peoples of the former Yugoslavia live together again in peace? If so, the region will require sustained help and support from the West. The United States and its European partners are in the midst of mustering the necessary resources and political will. There are numerous uncertainties complicating efforts to proceed with the reconstruction of the area. Whatever the international community may proclaim, the borders of Serbia, Kosovo, Bosnia, and Croatia could well change. The management of Kosovo's status and its relationship to Serbia is likely to produce serious tensions within the Alliance and between NATO and Russia. What politically will emerge from a beaten and traumatized Serbia no one can predict. Nor is it clear that Montenegro will remain as part of Yugoslavia, particularly if Milosevic continues to rule. An ethically fragile Macedonia has been badly weakened by the war and the inflow of three hundred thousand Kosovar deportees. Albania barely hangs together as a state. Neighboring Rumania and Bulgaria have avoided violence and begun to remake their societies, but they have suffered economically from the wars. The area of reconstruction is small and the population limited; the task at hand certainly is not of the dimensions of restoring post-war Europe. But the problems are daunting. Without security there will be no development. NATO forces will be needed indefinitely to keep the peace in Bosnia and Kosovo. Much more must be done to promote political and economic reform in the region, requiring vision and planning. The states of the region will first need urgent help to stabilize their economies and manage enormous humanitarian problems. They must also be able to envisage a better future, one that holds out the prospect of bringing them into Europe's political and economic mainstream. Realizing that goal will require profound changes in their economies and institutions as well as in their relationships with each other. Faced with these challenges, Western countries and a host of international institutions have begun to address how to foster the broad reconstruction of the area. The EU-sponsored stability pact, adopted in Cologne in June, is the beginning attempt at a multifaceted, coordinated approach to the problem. The G-8 has agreed on a broad program of financial assistance, and the EU has pledged 1.5 billion dollars for aid to Kosovo alone. Numerous follow-up conferences are already planned. Much more work has to be done to give reality and coherence to such efforts. Balkan reconstruction will be a protracted undertaking. It will require extremely difficult commodities – a comprehensive approach and the will, resources, and mechanisms to implement the effort. It is mostly to such a long term approach that this preliminary working paper addresses itself. It does not deal with the immediate requirements of refugee return and humanitarian assistance nor the urgent repair of human and material infrastructure. The World Bank and the IMF in cooperation with many other international organizations and interested countries are coordinating the assessment of needs and costs and have issued preliminary reports. The purpose of this working paper is to provide a broad political approach and to highlight the three key components of a comprehensive, long-term strategy: building security, integrating the region into the European Union, and fostering economic and political reform. For the purposes of this paper, we consider the region to be Serbia, Kosovo, Montenegro, Bosnia, Bulgaria, Macedonia, Albania, Croatia, and Rumania. This is somewhat arbitrary and these states are at different stages of political and economic development. The problems of Rumania and Bulgaria are quite different than Serbia's and Kosovo's; Croatia is much further advanced than next door Serbia and Bosnia. They all have to be dealt with separately, and no single state should hold back the progress of others in entering Europe. But they also face a collective future and the region will enjoy a lasting peace only if all its states leave the past behind and move decidedly to join the wider community.
Topic:
NATO, Ethnic Conflict, International Cooperation, International Political Economy, and World Bank
Political Geography:
Russia, United States, Europe, Bosnia, Kosovo, Yugoslavia, Serbia, Bulgaria, Balkans, Macedonia, Albania, and Croatia

700. The Future of Transatlantic Relations

Author:
Ted Galen Carpenter, Mark Falcoff, Adrian Karatnycky, Gary C. Hufbauer, Robert D. Blackwill, Leslie H. Gelb, Allen R. Adler, Mario L. Baeza, Philip Peters, Bernard W. Aronson, Jeffrey L. Bewkes, Rodolfo O. De La Garza, Daniel W. Fisk, Craig Fuller, M. Farooq Kathwari, Franklin W. Knight, Susan Kaufman Purcell, Peter W. Rodman, Riordan Roett, William D. Rogers, and Alexander F. Watson
Publication Date:
01-1999
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
This report addresses the current state and the future prospects for the transatlantic relationship. The broad challenge the U.S.-European partnership faces in the period ahead is threefold: to persuade others around the world in post-Cold War conditions to abide by internationally accepted norms and patterns of behavior and the rules of the international institutions that embody them; to deal skillfully with the emerging new power centers, of which China and India are the most prominent; and to meet the current serious threats to Western interests, especially in the Middle East, when these threats often seem to ordinary citizens more remote, abstract, and complex than during the Cold War. This daunting effort will clearly require transatlantic policies that involve a delicate and flexible combination of incentives and disincentives applied to these other countries in a highly discriminating manner in widely differing circumstances. Designing and sustaining such policies will be no easy task for Western governments with compelling domestic preoccupations in the full glare of the media spotlight.
Topic:
Security, Cold War, and International Political Economy
Political Geography:
United States, Europe, and Middle East