What Drives Consumption Booms?

Consumption booms have been common in both industrial and developingcountries, and several explanations have been offered for theiroccurrence. These include economywide wealth effects associatedwith favorable movements in the terms of trade or euphoric expectationstriggered by macroeconomic reforms, Ricardian effects associatedwith fiscal stabilization, lending booms following financialliberalization, and a variety of distortions in intertemporalrelative prices. Using a large cross-country sample of booms,this article assesses how widely applicable these explanationsare. The key finding is that wealth effects linked to favorablemovements in the terms of trade and anticipated improvementsin macroeconomic performance seem to have been more importantempirically than explanations relying primarily on fiscal phenomenaor distortions in intertemporal relative prices.     

How effective is monetary transmission in low-income countries? A survey of the empirical evidence

This paper surveys the evidence on the effectiveness of monetary transmission in low-income countries. It is hard to come away from this review with much confidence in the strength of monetary transmission in such countries. We distinguish between the “facts on the ground” and “methodological deficiencies” interpretations of the absence of evidence for strong monetary transmission. We suspect that “facts on the ground” are an important part of the story. If this conjecture is correct, the stabilization challenge in developing countries is acute indeed, and identifying the means of enhancing the effectiveness of monetary policy in such countries is an important challenge.     

Trilemma-Dilemma: Constraint or Choice? Some Empirical Evidence from a Structurally Identified Heterogeneous Panel VAR

Open Economies Review - We use a heterogeneous panel structural VAR approach to study the role of international financial integration in determining the effectiveness of monetary policy under...     

Money versus credit in the determination of output for small open economies

It is well known that in a small open economy where there is perfect substitutability between domestic and foreign assets and costless portfolio adjustment, the monetary authorities, pursuing an exchange-rate target, cannot control the money supply, but can influence the balance of payments through the use of domestic credit. It has been argued that domestic credit is therefore the relevant variable in output determination as well. This paper demonstrates, however, using a new classical structural model, that under the conditions that render the money supply uncontrollable, neither money nor domestic credit affects output.     

University spin-off programmes: How can they support the NTBF creation?

University researchers create technological opportunities that give rise to NTBF. The commercialization process of these opportunities is very complex, thus requiring universities to have programmes to support it (USOP). In this research 37 Spanish programmes, and 20 spin offs created with the support of the Technological University of Catalonia’s USOP (Innova Programme), have been examined. The study describes the technological opportunity creation, recognition and exploitation processes, and classifies the factors that determine it. Finally, the study develops a four-action-line-model that contributes to better understand how the activities carried out by USOPs minimize the barriers for spin off creation.     

Tight Money in a Post-Crisis Defense of the Exchange Rate: What Have We Learned?

Critics of the tight monetary policies pursued by some of thecountries hurt by the 1997 Asian financial crisis have questionedthe presumption that tight money can help sustain the valueof a currency. The issue is actually an empirical one becausetheory does not unambiguously predict the effect of tight moneyon the exchange rate under the circumstances faced by the crisiscountries. This article reviews the empirical research and showsthat the evidence does not yet support strong statements aboutpost-crisis links between monetary policy and the exchange rate.Proposed deviations from a sustainable medium-term monetarypolicy stance should thus be viewed with skepticism.      

Simultaneous confidence bands: Theory,implementation, and an application to SVARs

Simultaneous confidence bands are versatile tools for visualizing estimation uncertainty for parameter vectors, such as impulse response functions. In linear models, it is known that that the sup‐t confidence band is narrower than commonly used alternatives—for example, Bonferroni and projection bands. We show that the same ranking applies asymptotically even in general nonlinear models, such as vector autoregressions (VARs). Moreover, we provide further justification for the sup‐t band by showing that it is the optimal default choice when the researcher does not know the audience's preferences. Complementing existing plug‐in and bootstrap implementations, we propose a computationally convenient Bayesian sup‐t band with exact finite‐sample simultaneous credibility. In an application to structural VAR impulse response function estimation, the sup‐t band—which has been surprisingly overlooked in this setting—is at least 35% narrower than other off‐the‐shelf simultaneous bands.     

Devaluation,Debt, and Default in Emerging Economies

We explore the interactions between exchange rate and fiscal policy, and default on external debt. Exchange rate policy affects the supply of short-term debt facing the government. Under a conventional soft peg, it can be optimal for the government to set the exchange rate at a level in which partial default occurs. In this case multiple equilibria exist, with one featuring high interest rate, overvalued exchange rate, low level of output, and default. Default is also an equilibrium under a hard peg, precisely because devaluation is not an option. Under a hard peg, however, there is a unique equilibrium.

Public Debt Management and Macroeconomic Stability: An Overview

Recent research suggests that management of the public sector’sdebt can have important effects on a country’s macroeconomicperformance. This article provides an overview of the factorsthat the recent literature has identified as important in determiningthe optimal composition of the public debt. Based on this analysis,it attempts to establish general guidelines for public debtmanagement in emerging economies. To retain market access andpromote domestic financial market development, governments shouldgenerally finance themselves at market rates using a wide varietyof securities. Beyond this general principle, the optimal compositionof the public debt involves a tradeoff between enhancing thegovernment’s anti–inflationary credibility and reducingthe vulnerability of its budget to macroeconomic shocks. Consequently,the optimal composition of the debt depends on a country’scircumstances. Debt should be heavily weighted toward long-termnominal securities for governments that have anti–inflationarycredibility and toward long-term indexed debt for those thatdo not.      

Capital Flows: Issues and Policies

This paper presents an analytical overview of recent contributions to the literature on the policy implications of capital flows in emerging and developing countries, focusing specifically on capital inflows as well as on the links between inflows and subsequent capital-flow reversals. The objective is to clarify the policy challenges that such inflows pose and to evaluate the policy alternatives available to the recipient countries to cope with those challenges. A large menu of possible policy responses to large capital inflows is considered, and experience with the use of such policies is reviewed. A policy “decision tree”—i.e., an algorithm for determining how to deploy policies in response to an exogenous inflow episode—is developed, and strategies to achieve resilience to both inflows and outflows in a world where exogenous events may frequently drive capital flows in both directions are discussed.