Economic globalization and violent civil conflict: Is openness a pathway to peace?

There has been little systematic assessment of the impact of globalization on armed conflict within states. Drawing from bargaining theories of conflict, we posit that the global marketplace functions as an “audience” that rewards or punishes the policy choices of states. Globalization, which connotes an increased exposure to this marketplace, increases the relevance of the “costs” that this “audience” may impose. These prospective costs thus encourage peace and stability, as states that are integrated into the global economy have more to lose by instigating and sustaining violent conflict within their borders. Employing a two-stage Heckman Model, we assess the impact of various facets of globalization, including access to information, trade, foreign investment and aid flows, on intrastate conflict within the developing countries for 1990–1996.     

Portfolio stock adjustment and the real exchange rate: The Dollar-Mark (DM) and Mark-Sterling

The advent of “freely floating” exchange rates in the 1970's coincided with the emergence of what is known as “monetary” or “asset” models of exchange rate behavior where exchange ratesmove to equilibrate demand for stocks of monies. The fundamental monetary model assumes purchasing power parity holds in the long-run, and therefore exchange rates are determined by the same factors that determine relative prices, to wit, money stocks, real incomes, and nominal interest rates. Though early proponents of the monetary view clearly emphasized its long-run nature, empirical testing has by and large neglected this caveat. Thus a model developed for long-run equilibrium exchange rates has instead been tested many times over on short-run equilibrium rates. The latter require a distinct model of their own. This paper develops a short-run equilibrium exchange rate model based on deviations of the short-run exchange rate from its long-run equilibrium. The model differs in that all variables are cast in real terms. It also differs in that the monetary and current account exchange rate versions are shown to be subsets of the more general wealth/portfolio framework used here. The present model considers, in addition to stocks of monies, stocks of foreign assets, and stocks of domestic wealth.     

Money, real output, and deficit effects of coffee booms in Colombia

This paper develops a Vector Error Correction (VEC) model and uses the recently developed technique of ‘generalized’ impulse response analysis to test the empirical relationships in the Colombian economy between coffee revenues and a set of macro variables. We find that coffee price (revenue) shocks have exerted an important influence on money growth, inflation, and real exchange rates, and the direction of these effects are in line with some of the predictions of traditional Dutch Disease type models. The major difference between our results and the results of Dutch Disease type models arise in the effects of coffee booms on real output. We find that in the time horizon of 5 years after the boom, real output has increased in response to the effects of the coffee boom. The finding that coffee booms can result in positive long-run output effects is an important finding since it contradicts the traditional conclusion of Dutch Disease type models which envision an adverse long-run effect on output. We also find that the long-run effect of coffee booms is to reduce both current account and government deficits. These results illustrate strikingly that the term “Dutch Disease” is an unfortunately pejorative term that obscures the fact that coffee booms need not be viewed as a “disease” but as an extraordinary opportunity to strengthen internal and external balances.     

Governance structures of socially complex knowledge flows: Exchange, entitlement and gifts

The intangible aspects of knowledge transfer in multinational corporations (MNCs) continue to be a crucial area of research in social science research and raise the issue of knowledge governance structures. The purpose of this conceptual note is twofold. Firstly, we believe that there is more than one governance structure for successful knowledge transfers and flows. We provide a typology of three governance structures: “exchange,” “entitlement,” “gifts.” Secondly, most MNCs will need to take advantage of all three or a combination of these three socially complex governance structures.     

The Simplest Dynamic General-Equilibrium Model of an Open Economy

This paper presents the simplest possible general-equilibrium model of an open economy in which producer and consumer decisions are both intra- and intertemporally consistent. Consumers maximize the present value of the utility of consumption; producers maximize the present value of profits. The model solves for the set of intertemporally consistent prices. The parsimonious structure of the model is achieved by dividing the economy into two producing sectors—exports and domestic goods—and two consumed goods—imports and domestic goods. As a result, there is only one endogenous price per period to be solved for (the price of the domestic good), although “structural” questions, such as the evolution of the real exchange rate, can be posed with the model. Furthermore, with this structural breakdown, the model can be calibrated with national accounts data only. In the paper, we show how to calibrate such a model (including specification of an adjustment-cost function, to avoid “bang-bang” behavior) and use the model to examine various questions where intertemporal issues are important, including terms-of-trade shocks and tariff reform.     

A phased increase in the U.S. investment rate: Sacrifice times, T-year gains, and investment rate returns

We simulate a phased increase in the U.S. investment rate using a translog production function with technical progress (disembodied and/or embodied). We assume there will be an absorption lag implying that factors are underutilized during the transition to a higher investment rate. We find that the “sacrifice time” (the time that elapses until consumption surpasses the value it would have had under the initial investment rate) is roughly nine years. Across alternative specifications, phase-in periods, and absorption lags, the sacrifice time varies from seven to 13 years, and is insensitive to the percentage increase in the investment rate. With a three-year phase-in of a 20 percent increase in the investment rate with a one-year absorption lag, the average “ecade gain” in output (the percentage gain at the end of a decade) is roughly 4 percent; the decade gain in consumption, 0 percent; the five-decade gain, 10 percent in output and 6 percent in consumption; and the “investment rate return” (the internal rate of return on a permanent increase in the investment rate), 13 percent.     

Entry rates and the risks of misalignment in the EU8

New member states will join the EMU in the coming years. Setting the central parity at which they will join has been and will be a challenging task, as there is a considerable amount of uncertainty, both from a theoretical and an empirical perspective, surrounding the determination of the optimal exchange rate. Given the probable difficulty in evaluating the equilibrium rate it is thus advisable to focus on the effects of a misalignment of the entry rate for the economy, as it has implications for countries’ real and nominal convergence. An overvalued exchange rate would have an adverse impact on a country's competitiveness and its growth, while an undervalued currency would contribute to an overheating of the economy and an excessive inflation. The objective of this paper is to better understand the role of the entry rates for short run inflation and GDP developments and their implications for the inflation criterion and the real convergence process. Having estimated equilibrium exchange rates for eight out of ten countries that entered the EU in May 2004: Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovenia and Slovakia we conduct simulations showing what their adjustments to equilibrium would be if their entry rates deviated from the optimal ones.     

Ongoing Debate Between Foreign Aid and Economic Growth in Nigeria: A Wavelet Analysis

This study aims to reexamine the interconnection between economic growth, foreign aid, trade, gross fixed capital formation, and inflation rate in one model for the case of Nigeria, which has not yet been analyzed utilizing the new econometric techniques, employing time series data covering the years between 1980 and 2018. No previous research has employed a wavelet coherence technique to gather information on the dynamic connection and/or causality between these economic indicators at dissimilar frequencies and various time frames. The main objectives are to address the questions: (a) Is there long-run relationship between the indicators under consideration? (b) What are the main determinants of economic growth in the long run? (c) How are the indicators related at dissimilar frequencies and various time frames? The empirical findings confirm that (a) there is a long-run relationship between the indicators under consideration; (b) in the long run, economic growth is influenced significantly by foreign aid, trade openness, gross fixed capital formation, and inflation rate; (c) the outcomes of the wavelet coherence technique give evidence to support the long-run estimations of this study; and (d) the outcomes of wavelet coherence are supported by the Toda-Yamamoto causality test results.     

Explaining third-party success in gubernatorial elections: The cases of Alaska, Connecticut, Maine and Minnesota

In the 1990s alone, four states elected third-party governors. Walter Hickel of Alaska and Lowell Weicker of Connecticut were elected in 1990. Maine elected Angus King in 1994. And Jesse Ventura was elected governor of Minnesota in 1998. In this article, I examine these four cases in an attempt to identify the factors that contribute to third-party electoral success. I apply two models to these cases. The first model, “alternative culture,” holds that certain voters—regardless of specific context—are predisposed to support alternative candidates. The second model, “institutional context,” looks at factors such as name recognition, resources, and access to media as explanations of third-party success. I find that except for the influence of “partisan independence,” there is little evidence to support the persistence of an alternative culture of third-party voting. Rather, these four cases are linked by a context particularly favorable to these alternative candidates.     

Economic growth, poverty, and the international agencies

During the past few years, the international agencies have been playing down economic growth as the main road to the elimination of poverty and emphasizing the role of asset and income redistribution. The latest reflection of this attitude is the so-called “basic needs” approach. This essay attempts to demonstrate that where economic growth has been sufficiently high and sustained, it has been a powerful means of alleviating poverty. Growth has not “failed”; there is simply not enough International agencies should be cautious in advocating redistribution, for the results .     

Where o’ where did my baseball cards go?: Race,performance, and placement in the Topps ERA, 1956–1980

On the surface, baseball cards appear to be little more than uninteresting object of child's play; yet they provide invaluable data for assessing unique aspects of the social order. They reveal much about the state of society when they were produced and the people who collected them. This paper examines the unique numbering system the Topps company developed to differentiate among the “royalty of the diamond” from 1956 to 1980. Their system assigned to each card in a set a number that explicitly designated its placement, while implicitly establishing a hierarchical ordering among the players, ostensibly based on performance. It is arguable whether the numbering system Topps developed was based on performance or the ascribed characteristic of race. The results of our work suggest that player performance, not race, was the primary factor in the assignment of “prestigious” card numbers in Topps’ system.     

Welfare effects of demand management policies: Impact multipliers under alternative model structures

This paper explores the sensitivity of multiplier estimates under three alternative assumptions about factor supply. For this purpose, we have used a general equilibrium model of Malaysia which allows endogenous determination of factor and output prices and which permits substitution in both production and demand in response to price. The structure of the model and three alternative factor supply assumptions under which the model can be solved are described. These alternative assumptions amount to alternative “closure rules.” The results of a general increase in demand as estimated under each of the alternative closures are then presented. Finally, we examine the results of two specific types of demand increase under each of the closure rules, focusing especially upon welfare related variables such as real household consumption levels.     

Aspects of a new world development strategy II: Factors affecting the long-term prospects of developing nations

This paper explores some quantitative dimensions of the interdependence of rich and poor regions in the context of the United Nations World Model. It extends the original work on that model in three ways: (1) by updating some of the key parameters and exogenous variables in the light of recent data; (2) by developing a “control” solution to be used as a point of reference in policy simulations; and (3) by exploring the sensitivities of each of two groups of regions— developed and developing—to changes in one another's growth rates. Goals of closing the income gap between developed and developing regions and of increasing income levels in the latter are discussed.     

Minsky and Keynes on speculation and finance

Is Hyman Minsky's “Financial Instability Hypothesis” actually an interpretation of Keynes General Theory? Yes and no. Yes, they both describe an economy dominated by monetary forces in which employment and output dance to the expectations of financial players via speculation. But, no, they do not contain the same analytical structure. Keynes' theory specifies static positions of equilibrium. Minsky's analysis investigates the dynamic processes of the business cycle. Minsky's work might be viewed as the business cycle theory Keynes hinted at, but never completed.     

Short run responses to foreign exchange crises

This paper constructs a short-run general equilibrium model for an LDC-type economy. Some key features are the possibility of excess capacity and the presence of quantitative restrictions on exports and imports. A rich variety of pricing possibilities for tradeable goods is allowed for, including “water in the tariff” as well as domestic prices exceeding world prices with binding import quotas.The model is used to analyze alternative responses to a foreign-exchange crisis. Import controls, devaluation and cuts in government expenditures are compared. We find that: i) import quotas can worsen the balance of trade, ii) rationing foreign exchange for noncompetitive imports is stagflationary, increasing prices even under excess capacity, iii) a devaluation has strong effects on income distribution, although output and employment expand, and iv) cuts in government spending are deflationary but the income distribution effects are neutral.     

The problems of Indian history

Most historians write Indian history from a Euro-American perspective. Two great historians illustrate the problem. Francis Parkman wrote the story of the Euro-Americans' victory over the Indians. Bernard Bailyn describes the social process of settlement neutrally, but ignores the Indians. So long as scholars define the American past in this way, Indian history has no significance on its own terms. If they focus only on “intersections” of Europeans and native “obstacles,” Indians are merely symbols. The many problems fall into three categories: structural, methodological, and conceptual.     

An analysis of International Bulfer Stocks for cocoa and copper through dynamic optimization

Optimal control theory is used to analyze buffer stock price stabilisation. Linear econometric models of the world cocoa and copper markets are estimated over the period 1956-75 and the simulated to determine the “systematic” price for each commodity—the price when stochastic sources of market variation are suppressed. Stabilization at this price reduces the instability of producer revenue and also increases total revenue for both commodities. However, the buffer stocks are expensive. Net costs over the period 1966-76 are estimated at $1.7 billion for cocoa and $0.9 billion for copper.     

A quantification of lobbying benefits with an application to the common agricultural policy

We employ an empirical general equilibrium model of the CAP to determine which factors and countries would be expected to be opposed to or support reform of the CAP. The objective is to determine who are the “friends” and “enemies” of the CAP. The analysis studies the extent to which lobbying activity by these interested parties could be expected to encourage or discourage internal EU reform of the CAP. Several alternative policies to reform the CAP are evaluated in this manner in order to determine if one or another set of policies has a greater chance of being accepted. Specifically, we study the Uruguay Round Agreement, as well as a number of stated negotiating positions presented during the Round. The result will be a summary assessment of the relative politico-economic acceptability of these reform proposals within the EU. Our results lead to a very simple policy conclusion. Given the set of policy packages considered here, there is little doubt that the EU was most inclined to adopt a proposal incorporating compensation payments. Without further disaggregation of the analysis to identify the United States or Japan, we can only note that such a proposal is also the best as far as overall welfare goes for the rest of the world. Our results confirm the importance of sidepayments in the implementation of the Uruguay Round Agreement.     

The Influence of “Made in China” on the Great Moderation of the Global Economy：An Empirical Test Based on Value Chains*

We have collected data on China’s 22 main trading partners for 1984-2012 and used System GMM to study the influence of “Made in China” on the “Great Moderation” of the global economy. Our research shows that although trade scale, real effective exchange rate, oil prices, fixed capital investment and other variables have significantly expanded global economic volatility, “Made in China” has markedly restrained output growth rate fluctuations in countries around the world and price fluctuations in developed countries, helping the global economy develop with “high growth, low volatility.” “Made in China” is a long-term variable in the context of the global value chain. China needs to take advantage of global value chain restructuring to further upgrade and develop processing and manufacturing industry and expand its presence in the international market. It could choose to adopt a “mirror strategy” and launch trade sanctions targeting counterpart industries or enterprises to counter irrational trade sanctions from the developed countries. At the same time, however, it is important for China to make its own contribution to improve global economic governance and building a new international economic order in the era of global value chains by strengthening its policy coordination with other countries.     

Can Latin America carry its international debt? A prospective analysis using the Wharton Latin American debt simulation model

The international debt of the LDCs has become a critical concern, perhaps currently the most critical one, from the perspective of debtor countries and creditors alike. Through the efforts of the IMF, the BIS, the central banks, and the large commercial banks, a crash may have averted for the time being, but the heavy burden of the debt remains, particularly in Latin America, where it is increasingly concentrated. Draconian remedial measures now threaten social and economic development throughout the continent.This article evaluates the perspective for Latin American debts and payments using a debt simulation model. Debt restructuring with the usual “IMF conditions” will impose serious economic shocks in Latin America. But even so, debt service ratios will remain high except under optimistic assumptions about growth in the industrial countries and about commodity prices. Only in case of a solid economic recovery in the United States, Europe and Japan can one be sanguine about Latin America's ability to work its way out from under the debt burden.