CURRENT ACCOUNT ADJUSTMENT IN DEVELOPING COUNTRIES: THE ROLE OF EXCHANGE RATE REGIMES

This article employs hazard models to investigate the role of exchange rate regimes in the timing of current account adjustment in developing countries. We identify high current account deficit spells and find that fixed exchange rate regimes increase the duration of high deficit spells and thus delay current account adjustment. The result is robust to a variety of model specifications and alternative classifications of exchange rate regimes. When distinguishing between hard pegs and soft pegs, we notice that the delay in the current account adjustment is primarily driven by hard pegs rather than soft pegs. (JEL F3, F4)     

THE REAL EXCHANGE RATE AND REAL INTEREST DIFFERENTIALS: THE ROLE OF THE TREND‐CYCLE DECOMPOSITION

We propose an alternative model and method to reconcile the puzzling feature in the relationship between the real exchange rate and real interest rate differentials. Our simple two‐country model with preset prices, along with firms' misperception about the future exchange rate, implies that the real exchange rate follows an ARIMA(0,1,p) process. This allows us to compute the exact Beveridge‐Nelson decomposition, which is a model‐consistent decomposition. In accordance with our model, unit roots in the real exchange rates are found; and statistical inference is partially found to be affirmative regarding the link between the real exchange rate detrended by the Beveridge‐Nelson decomposition and corresponding real interest differentials. (JEL F31, F41)     

EXCHANGE RATE VOLATILITY: THE ROLE OF REAL SHOCKS AND THE VELOCITY OF MONEY

The effects of stochastic output shocks on the behavior of ex-change rates and nominal price levels is studied within the context of a two-country, cash-in-advance model. The analysis of this model, in contrast to the existing cash-in-advance literature, demonstrates that exchange rates can be more volatile than price levels even though agents' elasticity of substitution between foreign and domestic goods is greater than one-half. This possibility arises when output shocks are autocorrelated and are due to revisions in expectations that affect the terms of trade and/or the velocity of money.     

EXCHANGE RATE REGIMES AND FISCAL DISCIPLINE: THE ROLE OF CAPITAL CONTROLS

How do exchange rate regimes influence fiscal discipline? This important question has typically been addressed exploiting the classic dichotomy of fixed versus flexible exchange rate regimes assuming perfect capital mobility. However, the role of capital controls cannot be neglected, particularly in developing countries. This paper analyzes the effects of capital controls on fiscal performance by focusing on dual exchange rate regimes. In a model in which the fiscal policy is endogenously determined by a nonbenevolent fiscal authority, dual regimes induce politicians to have higher fiscal deficits than under fixed and flexible regimes operating under perfect capital mobility. The model also shows this effect increases as fiscal authorities become more impatient. Dynamic panel regressions confirm that dual regimes lead to higher fiscal deficits than fixed and flexible regimes operating under unified rates. Using a dummy for pre‐electoral year as an indicator of fiscal authorities' shortsightedness, we also confirm that dual exchange rate has a more adverse effect on fiscal deficits as the authorities become more impatient. (JEL E50, E60, F31, F41)     

POLITICAL RISK, NATIONAL DEFENSE AND THE DOLLAR

The Federal Reserve Board's trade-weighted real exchange rate index is highly correlated with the U.S. defense budget share of GNP. This paper provides evidence that the correlation is not spurious. Political risk associated with holding wealth in the United States varies inversely with U.S. military security and, due to the Soviet military threat to the West, is a major argument in foreign asset demand functions.     

ACROSS TIME AND REGIMES: 212 YEARS OF THE US‐UK REAL EXCHANGE RATE

The behavior of the US‐UK real exchange rate over the period 1794–2005 is examined. This series includes five intervals of floating nominal exchange rates and four fixed exchange rate regime periods. A consistent pattern of higher real exchange rate volatility under floating nominal rates is shown. Over time, real exchange rate movements have increasingly been driven by movements in the nominal exchange rate rather than relative prices. The persistence of the real exchange rate has been considerably higher in the postwar period. (JEL F31, N20)     

FINANCIAL FRICTIONS AND THE CHOICE OF EXCHANGE RATE REGIMES

This article provides a quantitative assessment of the role of financial frictions in the choice of exchange rate regimes. I use a two‐country model with sticky prices to compare different exchange rate arrangements. I simulate the model without and with borrowing constraints on investment, under monetary policy and technology shocks. I find that the stabilization properties of floating exchange rate regimes in face of foreign shocks are enhanced relative to fixed exchange rate in presence of credit frictions. In presence of symmetric and correlated shock, fixed exchange rates regimes can perform better than floating. This analysis can have important policy implications for accession countries joining the European Exchange Rate Mechanism II system and with high degrees of credit frictions. (JEL E3, E42, E44, E52, F41)     

THE ROLE OF THE BIDDING PROCESS IN PRICE DETERMINATION: JUMP BIDDING IN SEQUENTIAL ENGLISH AUCTIONS

This paper uses data collected from a series of public auctions of used cars in New Jersey to examine how strategic bidding affects price determination in open‐outcry English auctions. “Jumps” in the bidding, which occur when a new offer exceeds the old offer by more than the minimum bid increment, are highly pervasive and consistently related to the item’s presale estimated price. The size of the jumps is not affected by the selling order, however. This jump bidding pattern suggests that open‐outcry auctions are more appropriately interpreted with models that assume common‐item valuations rather than models assuming private valuations. (JEL D44)     

INTEREST RATE CEILINGS AND THE ROLE OF SECURITY AND COLLECTION REMEDIES IN LOAN CONTRACTS

Collateral or other security for personal loans and restrictions on creditor remedies for the collection of debts have varying effects on the price and quantity of credit which depend in turn on the level of interest rate ceilings. We report here on reduced-form equations of a supply-demand model estimated for five states with different interest rate restrictions. Interest rate ceilings limit how far lenders can raise loan rates to compensate for expected default losses but restrictions on collection remedies are generally associated with a higher interest rate.     

FISCAL STABILIZATION WITH PARTIAL EXCHANGE RATE PASS‐THROUGH

This article examines the role of fiscal stabilization policy in a two‐country framework that allows for partial exchange rate pass‐through. Analytical solutions for optimal monetary and fiscal policy rules depend on the degree of pass‐through. Each country unilaterally uses its fiscal instrument to stabilize the costs facing exporters. The welfare effects differ strongly depending on the degree of pass‐through. For high levels, both countries are better off with the fiscal instrument and welfare is closer to the benchmark flex‐price level. For low levels, however, the unilateral equilibrium policy rules lead to high volatility in taxes, and fiscal policy ends up being destabilizing by transmitting exchange rate fluctuations. Because these results stem from strategic considerations by the two countries, the fiscal instrument is not used under policy coordination. In addition, imposing a monetary union increases welfare when pass‐through is low, including the case of local currency pricing. (JEL E52, E63, F41, F42)     

DIFFICULTIES IN HOLDING THE ROLE OF THE OBSERVER

This is the second of two linked papers on learning from infant and child observation in social work qualifying training (linked with Linnet McMahon & Steve Farnfield ‘Too Close In Or Too Far Out’). A former student reflects on her own observation experience. She considers the anxieties aroused and their containment, which became possible initially through reflection in the seminar group and ultimately through her internalisation of the reflective process. She discusses the value of her learning in subsequent practice in palliative care.     

THE ROLE OF TIME FRAME IN THE ASSESSMENT OF FAMILY FUNCTIONING

The purpose of this study was to evaluate how the stated time frame of family questionnaires can influence the individual's report of family events and relationships. Three whole-family assessment procedures were administered to a large sample of intact families under two conditions—when the respondent was asked to describe his/her family "in general" and "during the past week". Major findings indicated that (a) reports of family relationships reflected the same overall evaluation regardless of time frame, (b) the number or degree of positive endorsements was greater on the "in general" than the "past week" format, and (c) the impact of time frame varied greatly as a function of instrument. Explanations and implications of these findings are discussed.     

THE DECLINE OF OVER-TIME COMPARABILITY IN THE NATIONAL ELECTION STUDIES

The National Election Studies conducted by the University ofMichigan Survey Research Center and Center for Political Studiesprovide the best data set for studying the political attitudesand behavior of the American electorate. The American NationalElection Studies Data Sourcebook, which complies NES surveyresults between 1952 and 1978, demonstrates the extent to whichthese surveys facilitate over-time analysis. This article usesthe Sourcebook as a baseline and shows that there has been asubstantial decline in the over-time comparability of itemsmeasuring public policy preferences and of items measuring supportfor the political system.     

THE ROLE OF ASSETS IN LABOR SUPPLY FUNCTIONS

This paper examines the argument advanced by Smith (1977) that it is inappropriate to include current assets in labor supply functions, under the assumption that a life-cycle model underlies both the asset accumulation process and the labor supply process. It is shown that on a theoretical level current labor supply may still be viewed as a function of current assets. It is also demonstrated that in empirical work based upon a life-cycle labor supply model, it may or may not be appropriate to use current assets or current wealth as an independent variable in a labor supply regression     

THE ROLE OF CONSTITUENT TRUST IN CONGRESSIONAL ELECTIONS

The purpose of this inquiry is to introduce a new variable intothe study of congressional elections—constituent trust.Constituent trust is defined as the level of confidence thatconstituents have in their elected representative. This analysissuggests a strategy for measuring constituent trust and developsa model that relates constituent trust directly and indirectlyto electoral support. By pooling cross-sectional data drawnfrom the University of Michigan's American National ElectionStudies (1978–84), I demonstrate that when constituenttrust is salient in voter cognitions, it has a significant directinfluence on electoral support and is a better predictor ofelectoral support than the incumbent's party identification.In addition to its direct effects, I show that constituent trustindirectly influences electoral support because of its causalrelationship to incumbent popularity.     

THE ROLE OF THE GOLD STANDARD IN KEYNESIAN MONETARY THEORY

This paper shows that many of the most distinctive features of Keynesian economics are best understood if one views the General Theory as essentially a gold standard model. A close examination of Keynes's statements on contemporaneous policy issues suggests that the gold standard had a profound impact on his views on monetary policy effectiveness. In particular, I show that the liquidity trap has been widely misunderstood. Finally, I argue that post–General Theory developments in Keynesian economics are best understood as a response to the inapplicability of Keynes's original message to a world of fiat money regimes. ( JEL B22, E12, N1)     

GENDER PERFORMANCE GAPS: QUASI‐EXPERIMENTAL EVIDENCE ON THE ROLE OF GENDER DIFFERENCES IN SLEEP CYCLES

Sleep studies suggest that girls go to sleep earlier, are more active in the morning, and cope with sleep deprivation better than boys. We provide the first causal evidence on how gender differences in sleep cycles can help explain the gender performance gap. We exploit over 240,000 assignment‐level grades from a quasi‐experiment where students' schedules alternated between morning and afternoon start times each month. Relative to girls, we find that boys' achievement benefits from a later start time. For classes taught at the beginning of the school day, our estimates explain up to 16% of the gender performance gap. (JEL H52, I20, I21)