Regret theory and policy reform ∗

This paper offers an explanation of policy reforms undertaken in times of an economic crisis. Our explanation does not depend either on conflicts of interests between different socio-economic groups, or on the informational imperfection about the effectiveness of the current policy regime. The single decision maker in our model experiences regrets when the uncertain reform outcome is worse than the status quo. We show that an economic crisis which reduces the status-quo income makes the regret-experiencing decision maker more eager to undertake reforms in times of an economic crisis, despite the higher utility costs of adjustments.     

Institutional constraints,double imbalances and policy option—global financial crisis and China’s fiscal policy

With the enormous development of China’s economy, we re-implement the proactive fiscal policy not only to response to the global financial crisis, but also to take advantage of the opportunity to resolve the institutional constraints, transform China’s economic growth pattern, keep stability and promote the sustainable growth of the economy. So the goal of fiscal policy should weigh easing the economic crisis against long-term stability and the development of economy. The past experiences of fiscal policy practices in China indicate that the traditional simple counter-cyclical fiscal policy may be able to pull the economy out of recession, but it has little effect on automatic recovery of the economy. Therefore, the fiscal policies need to hang on the entire reform process and the whole economic structure adjustment. This paper firstly reveals the root of “double imbalances” and institutional constraints, then analyzes the paradox between such constraints, and discusses the space of positive fiscal policy.     

Are things moving? On demographic processes and social policy

Some recent positive changes in demographic trends in the Soviet Union are described. These include an increase in life expectancy in 1986, particularly for males, and an increase in the birth rate, although fertility in European Russia is still below replacement level. The author then considers how social policy, including family policy, can be expected to influence demographic variables in accordance with the country's needs, particularly in light of major differences among regions in population dynamics. He concludes by considering the relationship between demographic factors and democracy.     

Input–output theory and institutional aspects of environmental policy

National accounting over the years has developed in close interaction with input–output analysis. However, present developments involving core and satellite accounts seem to suggest that this relation will become less close, with possible negative consequences for analysis and policy. In this paper we show that also in the new frameworks the input–output (I–O) table will most likely retain its central place. To illustrate this, we discuss the problem of the choice of policy background principles in environmental pollution abatement. We show that in the case of physical accounts of the NAMEA-type the question of the origin of environmental pollution can be addressed in a novel way. This suggests alternative definitions of the concept of ‘a polluter’, and new rules for the allocation of social cost.     

Game analysis on Huaihe River anti-pollution administration mechanism and policy research

Based on the literature review of environmental anti-pollution researches, this paper analyzes the administrative mechanism of Huaihe River anti-pollution with game theory. Based on the quantitative analysis on three corresponding game models with four players including local residents, enterprises, local governments and competent authorities at higher levels, this paper demonstrates four main shortcomings of current administrative mechanism of Huaihe River anti-pollution system, including low emission cost, low connivance cost, overemphasis on heavy fine of the enterprises, neglect of the punishment on the local departments and intersected administrative mechanism. This paper sets up antipollution administrative mechanism, combining economic method with noneconomic method, government control with market mechanism, and introducing public participation. At last, this paper proposes policies, such as implementing emissions trading system, reforming public participation system, and reforming government＇s environmental protection mechanism to promote law enforcement.     

Monetary policy and exchange market pressure–evidence from sub-Saharan Africa

The purpose of this study was to assess the impact of monetary policy on foreign exchange market pressure (EMP) in developing country contexts for some selected countries in sub-Saharan Africa (SSA) and to measure the ability of monetary policy to significantly address currency pressures that arise from trading on the global market. This study was motivated by the fact that most of the SSA countries are developing economies that have negative net export positions and stand to lose significantly from consistently deteriorating foreign exchange position. The study, therefore, employs a dynamic panel model to test the hypothesis that a tighter monetary policy stance lends strength to a currency and vice versa, using 20 SSA economies for the period from 1991 to 2010. This study finds a negative and significant relationship between monetary policy and EMP, implying an easing of EMP in the face of contractionary monetary policy. The findings also point to significant relations between aggregate output, levels of public debt, the current account balance, terms of trade and EMP. Findings of this study have important implications as regards the policy direction on exchange rate and currency management.     

Assessment of natural resources and the policy of subsidies in grain production

Based on the analysis on the status quo of natural resources input in Brain production and on the policy of Brain subsidies, this paper puts forward a new idea - establishing grain subsidies through assessing the value of the natural resources in Brain production. The assessment of the natural resources in Brain production provides rationale and reference standard for the policy of Brain subsidies, which will promote the sustainable use of natural resources accordingly. This paper concludes： （1） it is necessary for the grain subsidies to assess the full value of natural resources, including economic value, ecological value and social value： （2） the government should give farmers direct subsidies or environment subsidies according to the economic and ecological value of natural resources in grain production, （3） the social value of natural resources can be realized by establishing the country social security system, taking the social value as the criterion for the payment for part of farmers＇ insurance.     

Germany and Italy: conflicting policy paradigms towards European monetary integration?

In the literature on European monetary integration Germany and Italy are mostly strongly contrasted. However, this paper argues that there were important similarities between the policy paradigms in these two countries, in particular if a broader historical perspective is adopted. This work analyses the policy paradigms towards European monetary integration in Italy and Germany. Moreover, it contextualises these paradigms into the national institutional setting: while Germany was characterised by power sharing institutions, Italy featured power fragmentation (something which also affected the economic performance of both countries). There were significant differences between the policy paradigms of foreign policy-makers and economic policy-makers. Foreign policy makers, in both countries, under the influence of a European federalist vision, were strongly in favour of European monetary integration. These beliefs of foreign policy decision makers were crucial in charting EMU policy at history-making moments. The pro EMU policy paradigms of foreign policymakers contrasted, during most of the period covered, with the more sceptical beliefs of economic policy makers. In both countries, economic policy-makers, at different moments, had doubts whether enough “convergence” had been reached to make a more stable exchange rate system sustainable.

Hayek’s monetary theory and policy: A note on alleged inconsistency

Challenging the dominant view, we claim that Hayek’s monetary views did not significantly change over his lifetime. The prevalent perception of early Hayek as a money stream stabilizer and late Hayek as a price level stabilizer is attributable to an unjustified normative interpretation of Hayek’s positive analysis. We argue that in his contributions to monetary theory, Hayek took the goals of monetary policy as exogenously given and analysed the efficiency of different means of achieving them. Hayek’s allegedly inconsistent transformation from a critic to an advocate of price level stabilization is explained by a change of issues under his focus, rather than by a change in his positive views. We also claim that Hayek was always aware that every practical monetary policy involves difficult trade-offs and that he was therefore reluctant to impose his own value judgments on what people should strive for.     

Monetary–fiscal policy interactions and commitment versus discretion in a monetary union

We consider monetary–fiscal policy interactions in a monetary union. If monetary and fiscal authorities have different ideal output and inflation targets, the Nash equilibrium output or inflation or both are beyond the ideal points of all authorities. Leadership of either authority is better. Fiscal discretion entirely negates the advantage of monetary commitment: The optimal monetary rule is equivalent to discretionary leadership of monetary over fiscal policy. Agreement about ideal output and inflation creates a monetary–fiscal symbiosis, yielding the ideal point despite disagreement about the relative weights of the two objectives, for any order of moves, without fiscal co-ordination, and without monetary commitment.     

Adjustment,trade policy and investment slumps: evidence from east asia ∗

This paper presents a model of investment in five East Asian economies over the 1970s and 80s, paying particular attention to the impact of the policy reforms which have accompanied Structural Adjustment Programmes. A priori, the impact of trade reform on investment can be positive or negative; in practise, it is found to be negative.     

Whose policy uncertainty affects commodity trade between Australia and the United States?

Recent studies are assessing the impact of news-based policy uncertainty measure on trade flows between countries. In this paper we add to this new literature by investigating the symmetric and asymmetric effects of Australian policy uncertainty index and the U.S. index on trade flows of 63 two-digit industries that trade between the two countries. When we estimated a symmetric and linear model for each industry, we found short-run effects of both uncertainty measures on 30% of the industries' trade flows. However, this number increased to 70% when an asymmetric and nonlinear model was estimated. The long-run effects of both policy uncertainty followed similar pattern. Less than 10% of trade was affected by the estimates of the linear models. However, estimates of the nonlinear models predicted that 41.20% (26.53%) of the U.S. exports to Australia was affected by the U.S. uncertainty (Australian uncertainty). As for the Australian exports to the United States, 6.72% (5.5%) of its exports were affected by the changes in the U.S. policy uncertainty (Australian uncertainty). In almost all industries, increased uncertainty was found to hurt the trade and decreased uncertainty was found to boost it at different rate or asymmetrically. In sum, the U.S. and Australian policy uncertainty measure affects U.S. exports to Australia much more than they affect Australian exports to the United States.     

Endogenous growth and environmental policy: are the processes of growth and tertiarization in developed economies reversible?

The starting point for this article is the idea put forward by Gadrey (2008, 2010) that environmental problems and a policy of addressing them by introducing an environmental tax could trigger economic contraction and downscaling and a shrinking of the service sector in developed economies. The purpose of this article is to test these hypotheses using an evolutionary simulation model. To this end, we use a model of endogenous growth and structural change into which an environmental dimension is incorporated. The results of our simulations certainly reveal structural change within service industries but no change in the distribution of employment between services and manufacturing. Furthermore, we show that the environmentally desirable stagnation of labor productivity in the capital goods sector is compatible with a largely positive growth trend in the economy as a whole, with the development of knowledge-intensive business services apparently able partially to offset the stagnation of productivity in the capital goods sector. We conclude by emphasizing the need for environmental innovation in service activities and cast doubt on the long-term effectiveness of an environmental tax in the fight against pollution.     

Does integration and economic policy coordination promote business cycle synchronization in the EU?

Previous studies have discounted important factors and indirect channels that might contribute to business cycle synchronization (BCS) in the EU. We estimate the effects of market integration and economic policy coordination on bilateral business cycle correlations over the period 1995–2012 using a simultaneous equations model that takes into accounts both the endogenous relationships and unveils direct and indirect effects. The results suggest that (1) trade and FDI have a pronounced positive effect on BCS, particularly between incumbent and new EU members. (2) Rising specialization does not decouple business cycles. (3) The decline of income disparities in EU27 contributes to BCS, as converging countries develop stronger trade and FDI linkages. (4) There is strong evidence that poor fiscal discipline of EU members is a major impediment of business cycle synchronization. (5) The same argument holds true for exchange rate fluctuations that hinder BCS, particularly in EU15. Since BCS is a fundamental prerequisite and objective in an effective monetary union, the EU has to promote market integration and strengthen the common setting of economic policies.     

China’s direct investment in the European Union: challenges and policy responses

The dramatic rise of Chinese direct investment into the European Union (EU) has sparked a debate about the control that China may be seeking to take over European economies. Quite naturally, these concerns have led to repeated calls that action be taken to slow down, if not to halt entirely, this growing trend. The objective of the article is to shed light on this debate. Following a thorough analysis of Chinese direct investment in the EU, this article suggests that the challenges posed by these inflows are widely overblown. Despite this, the article concludes that it is necessary to have a systematic approach to regulating inbound foreign investment (including from China) in the EU. Such an approach may help guard against the risk of a protectionist drift inside the EU, as well as the possibility that some investors may one day pose a threat to national security. This article concludes that although the current fragmented regulatory approach is unsatisfactory, because of the difficulties associated with a unified EU-wide review process, the most realistic option is to promote a more systematic and coordinated use of existing mechanisms such as competition policy. Also, pushing for the negotiation of a China–EU BIT is certainly a promising avenue to enhance the EU’s bargaining leverage based on the principle of positive reciprocity.     

The implications of the ‘learning curve’ for firm strategy and public policy

The objective of this paper is to examine the relationships between costs and cumulative output, and to explore the implications of these relationships for firm strategy and public policy.     

Keynes and India, 1909–1913: a study on foreign investment policy

Abstract

Keynes's work on India before the First World War concentrated on analysis of the gold exchange standard and the stabilization of the rupee external value. Indian monetary arrangements were framed into a plan for foreign investment, implemented by the India Office in London. This policy, which was a typical example of public control over investments, occasioned Keynes's first job as an applied economist. Although neglected by Keynesian scholarship, this learning by doing experience is likely to have played a significant role in the young economist's training and education.     

Structural change and macroeconomic policy: the case of Greece (1981–85)

This article examines one aspect of ‘alternative economic strategies’ which seek to introduce planning and other interventionist economic policies in order to promote structural change. Experience has shown, most recently in France and Greece in the 1980s, that such strategies are often abandoned because of macro-economic imbalances, such as current account crises. Thus it seems that a crucial aspect of such strategies should be the co-ordination of short-term, or macro-economic, policies with longer-term supply-side policies. The interest in the Greek experiment (1981–85) lies in the fact that the Greek socialists were aware of the need for such co-ordination and their strategy for ‘stabilization through development’ and ‘gradual adjustment’ was formulated for this purpose. This article looks at the economic theory underlying this approach and the implementation of the strategy. However it is argued that the degree of control necessary for the successful implementation of the strategy was lacking. The failure of macroeconomic policy once more contributed to the abandonment of an alternative economic strategy. I investigate the reasons behind this failure and draw some lessons of more general relevance for the successful co-ordination of macroeconomic and supply-side policies.

Accumulation involves a process of continual structural transformation, a qualitative change, in which the scale, content and location of economic activity are progressively transformed. There is no automatic mechanism ensuring that this takes place in a desirable manner or at a desirable pace (Eatwell and Green, 1984: 202).