Evolution of Bilateral Capital Flows to Developing Countries at Intensive and Extensive Margins

Motivated by the rise in capital flows to low‐income countries (LICs), we examine the nature of these flows and the factors affecting foreign investors' decision. Recognizing the presence of fixed investment costs, we analyze capital flows at both intensive and extensive margins. To fix ideas, we resort to the gravity literature for the estimating relationships which we embed into a two‐tier econometric framework with cross‐sectional dependence. Our main finding is that market entry costs are statistically and economically very detrimental to LICs. We also obtain the gravity‐type relationship for the destination income unconditionally but not after conditioning on relevant variables, as well as establish labor productivity as a robust attractor of capital inflows.     

Information, Trading, and Volatility: Evidence from Weather-Sensitive Markets

We find that trading‐ versus nontrading‐period variance ratios in weather‐sensitive markets are lower than those in the equity market and higher than those in the currency market. The variance ratios are also substantially lower during periods of the year when prices are most sensitive to the weather. Moreover, the comovement of returns and volatilities for related commodities is stronger during the weather‐sensitive season, largely due to stronger comovement during nontrading periods. These results are consistent with a strong link between prices and public information flow and cannot be explained by pricing errors or changes in trading activity.     

The Marginal Costs of Electricity Supply in Victoria*

This paper discusses some of the determinants of the costs of supplying electricity by season, by time of day and by location. A model is constructed of the State Electricity Commission of Victoria grid to illustrate the propositions. It is found that current tariffs bear little relationship to the opportunity costs of supplying electricity.     

Has China displaced other Asian countries' exports?

This paper uses gravity modelling to explore whether and how the growth of China's exports is displacing exports of other Asian countries to third markets over the period 1990–2003. Chinese exports are defined both narrowly and more broadly to include exports from Hong Kong. We investigate whether the displacement effect on Asian exports differs when exports from Hong Kong and China are combined compared to the narrow case of Chinese exports only. Aggregate and disaggregated analyses are undertaken. In the latter, we explore whether the displacement effect varies across Asian countries and in trade with different types of countries. We find evidence of a displacement effect which is more pronounced in developed markets and stronger for Hong Kong and China combined. Further it is the high income Asian exporters that experienced a greater displacement effect. We also investigate whether China's development has generated any offsetting effects on its neighbours' exports to China itself and find that Chinese growth has indeed increased China's imports from the Asian countries in the sample and in particular from Japan and Korea.     

Accounting for Forward Rates in Markets for Foreign Currency

Forward and spot exchange rates between major currencies imply large standard deviations of both predictable returns from currency speculation and of the equilibrium price measure (the intertemporal marginal rate of substitution). Representative agent theory with time-additive preferences cannot account for either of these properties. We show that the theory does considerably better along these dimensions when the representative agent's preferences exhibit habit persistence, but that the theory fails to reproduce some of the other properties of the data—in particular, the strong autocorrelation of forward premiums.     

Family Structure and Family Earnings: The Determinants of Earnings Differences among Family Types

Mean total family earnings differ greatly by family structure (the number, age, and gender of adults, and the presence or absence of children and dependent elders). This study classifies families into seven major types by structure, and analyzes inequality in mean earnings among these types. Differences in mean earnings among types depend primarily on the amount of labor supplied to the labor market. The quantity of labor supplied, in turn, while reflecting in part differences in the head's characteristics (such as human capital), is largely determined by family structure. Earnings changes by family type over time from 1973 to 1987 are also discussed.