A stochastic dynamic model of trade and growth: Convergence and diversification

There is a growing literature that studies the properties of models that combine international trade and neoclassical growth theory, but mostly in a deterministic setting. In this paper we introduce uncertainty in a dynamic Heckscher-Ohlin model and characterize the equilibrium of a small open economy in such an environment. We show that, when trade is balanced period-by-period, the per capita output and consumption of a small open economy converge to an invariant distribution that is independent of the initial wealth. Further, at the invariant distribution, there are periods in which the small economy diversifies. Numerical simulations show that the speed of convergence increases with the size of the shocks. In the limit, when there is no uncertainty, there is no convergence and countries may specialize permanently. The paper highlights the role of market incompleteness, as a result of the period-by-period trade balance, in this setup. Through an analytical example we also illustrate the importance of country specific risk in delivering our results.     

Exchange rate fluctuations,firm size,and export behavior: an empirical investigation

In this paper, we examine how changes in the exchange rate and its volatility affect the export behavior of manufacturing firms. We also investigate whether both exchange rate changes and exchange rate volatility affect firms of different sizes differently. Applying the two-step system generalized method of moment estimator on our data for a sample of 221 Pakistani manufacturing firms, we find that the real exchange rate depreciation has positive impacts, whereas the exchange rate volatility has negative impacts on firms’ exports. We also find that compared to large-sized firms, small- and medium-sized exporting firms are more likely to benefit from currency depreciations. Yet, regarding the effect of exchange rate volatility, we find that the adverse impact of exchange rate volatility is weaker for large-sized firms as compared to small- and medium-sized firms. Our findings confirm the presence of nonlinearity in export-deterring (favoring) effects of exchange rate volatility (depreciation) on exporting behavior depending on firm size. Pakistan should design and implement export-favoring preferential policies by emphasizing on real exchange rate stabilization and providing incentives to large firms to come into being. Small- and medium-sized enterprises should develop such export strategies that help reduce their size disadvantages, particularly in managing exchange rate risks.     

Principal Features of Building Social Accounts Matrix and Improving Statistical Database for Eco-countries

With common borders of the population, total area, and GDP （PPP-based） of Economic Cooperation Organization （ECO） member states are estimated as 416 million persons, 7.9 million m2, and US$2.7 trillion respectively （2010 data）. Although heterogeneous in the extent, there is economic development, overall, with serious energy and transport-transit relations among countries that is reflected in growing trade turnover year-by-year. However, there are still rather unused resources and capacity in such areas of cooperation among countries as exchange of energy, transport services, agricultural and industrial goods, use of opportunities for tourism, promoting investment and innovation processes and other areas. Certainly, maximum and optimal use of these resources calls for availability of analytical means capable of accounting for relations both within member states and among them. The implementation of computable general equilibrium （CGE） modeling in each member state would thus be of great significance in resolution of these problems both in terms of accounting for input-output linkages within the countries as well as enabling impact of main trading partners and goods and services among countries. The analysis carried out indicates that there are a number of problems in application of CGE model in most of the member states. As such, input-output tables are not compiled in some countries, while in others despite the fact that these tables are compiled, there are no attempts to build the model, yet in other countries, even if the CGE model is implemented, there are difficulties in taking into account the real results in the face of serious problems related to improving national accounts system database. Summarizing these problems, it is possible to conclude that to ensure the application of a CGE model,there is a great need to work out procedures of compilation of a social accounts matrix （SAM） that lies on the basis of this model, for which the relevant statistics of a member state must be improved     

Estimation of global systematic risk for securities listed in multiple markets

In this era of rapid globalization of financial markets there has been a substantial increase in cross-listings of stocks in foreign and regional capital markets. As many as a third to a half of the stocks in some major exchanges are foreign listed. The multiple listings of stocks has major implications for the concept of systematic risk. This paper demonstrates that the estimator for systematic risk and the methodology itself changes when stocks are listed in multiple markets. The paper suggests general procedures, using maximum information from the multiple markets, to obtain the estimator of beta under a variety of assumptions about the error terms of the market models in the different capital markets. The assumptions pertain both to the volatilities of the abnormal returns in each market, and to the relationship between the markets.     

Dynamic Capabilities, Government Policies, and Performance in Firms from Emerging Economies: Evidence from India and Pakistan

In this study we developed a model of the dynamic capability development mechanisms in Emerging Market manufacturing Firms (EMF). We identified three dynamic capability development mechanisms: organizational learning, reverse engineering, and manufacturing flexibility. We generated hypotheses based on this framework, linking these mechanisms with firm performance. We also modelled the roles played by managerial use of two types of government policies: input supporting policies and marketing supporting policies. We tested our hypotheses on a sample of Indian and Pakistani manufacturing firms. Results showed that organizational learning, reverse engineering and manufacturing flexibility had significant impacts on EMF performance. Additionally, organizational learning combined with input supporting government policies enhanced performance, and the combination of manufacturing flexibility and marketing supporting government policies had an insignificant influence on performance.     

On the Design and Pareto-Optimality of Participating Mortgages

This paper develops a micro-economic model and proceeds with numerical simulation to demonstrate that participating mortgages can improve social welfare when the real estate ownership is shared among the different taxable entities. The optimal distribution of real estate ownership and lending will tend to be concentrated in taxable and nontaxable hands, respectively, with lending conducted via participating mortgages. This paper also demonstrates the violation of the well-known, risk-neutral valuation argument of the Black and Scholes (1973) model because of the lack of a riskless hedge due to the uniqueness of real estate.     

Japan's fifth generation computer project

The Japanese Fifth Generation project is aimed at increasing computing power by around three orders of magnitude over 15 years. Motives are political and social as well as commercial. The Japanese have sought international cooperation in this attempt to beat IBM (in particular) by ignoring compatibility with existing systems. Although there is not even an embryonic Vth generation system yet, final success looks likely. One goal is to be able to process knowledge (rather than data), in a user-friendly manner.     

Meeting basic needs: An overview

This paper summarizes some of the main issues related to the World Bank's basic-needs oriented lending programme. In particular, based on country experience it discusses the lessons learned with regard to sectoral policies and programming for their basic needs and their implications for future lending.     

Anatomy of Corruption: An Approach to the Political Economy of Underdevelopment

Abstract . An examination and critique of the functionalist literature on corruption in the political administration of Less Developed Countries (LDCs) indicate that its claims are without empirical foundation. Its theses with regard to the political, economic and administrative effects in most LDCs contrast with the facts. No benefits for development from corruption are found; market corruption, for example, does not appear to improve allocative efficiency. The erosion in a government's capacity to formulate and implement policies making for economic growth is an obstacle to economic progress.