The Exchange Rate Policy of the Euro: A Matter of Size?

This paper analyzes how country size affects exchange rate policy and volatility. A hump shaped relation between exchange rate variability and the size of countries is generated in the theoretical model: exchange rate variability increases with country size for small countries but then decreases for large countries. The paper finds that this theoretical prediction holds well for bilateral exchange rates of the OECD countries in the period between 1980 and 1995 as well as for a subsample of European exchange rates with respect to the dollar. The results suggest that the dollar/euro volability may be lower than the present dollar/DM volatility.J. Japan. Int. Econ., Dec. 1998,12(4), pp. 455–482. CERAS-ENPC, Graduate Institute of International Studies, and CEPR, 28 rue des Saints Pères, Paris 75007, France.Copyright 1998 Academic Press.Journal of Economic LiteratureClassification Numbers F33, F41, F42.     

Fiscal Faux Pas?: An Analysis of the Revenue Implications of Trade Liberalization

This paper examines the argument that trade liberalization depresses tax revenue/GDP ratios in developing countries. This occurs because the structural characteristics associated with developing countries limit their ability to make the transition from trade to domestic taxes. Using a panel of 80 developing and industrialized countries over 1970–98, the econometric analysis carried out employs a fixed-effects regression framework to examine the evidence. The results indicate that low-income and upper middle-income countries have experienced declining tax revenues as a result of falling income and trade tax revenues and that structural characteristics have been significant in explaining the decline.     

Vernacular Models of Development: An Analysis of Indonesia Under the “New Order”

Official development discourses often differ from the everyday discussions and activities of development agents. If the former reflect an official model of development, then the latter could be said to reflect a “vernacular” model. The latter model is the focus of this analysis, taking as a case study development in Indonesia during the “New Order” regime (1966–98) of former President Suharto. Resource relations between the Indonesian state center and rural periphery are examined along with the norms that govern the flow of resources as well as information on resource-use. This vernacular model of resource and information flows helps to explain the economic, political, and environmental crisis that befell Indonesia in the late 1990s and is relevant to understanding the development dynamics of a number of other nations.     

Determinants of the levels and distribution of PL 480 food aid: 1955–1979

This paper reports the results of statistical tests of hypotheses related to a number of debates surrounding the determinants of the levels and distribution of US food aid. The statistical results supported the following hypotheses: (1) PL 480 food aid is influenced by the need of the recipient country; (2) PL 480 food aid is tied to political and military concerns of the US; (3) PL 480 food aid is influenced by the political party occupying the White House; (4) PL 480 food aid and US commercial sales of agricultural commodities are substitutes; and (5) PL 480 food aid is inversely related to a recipient's foreign exchange holdings.     

Changes in Competitive Behavior of Foreign-invested Enterprises: A Case Study of the Chinese Detergent Industry

China began absorbing FDI towards the end of the 1970s. By the end of 2002, China had approved the establishment of 424,196 foreign-invested enterprises, involving a total contractual volume of US$ 828.06 billion, 447.966 billion of which were put into actual use.The probability of transnational corporations monopolizing the market of a host country and their important position in certain industries in China have prompted many to ask: Will transnational corporations     

Impact of liberalization of financial resources in China’s economic growth: evidence from provinces

By using the sources of investment and based on provincial data, this paper examines the efficiency performance of the four sources of total investment in fixed assets in China for the period 1985–1998: state budget appropriation, national bank loans, self-raised funds, and foreign investment. The result of the panel data study shows that the growth of provincial output is positively related to the growth of national bank loans and self-raised funds. State appropriation is still a significant source of investment in the interior provinces, though this suggests a lack of alternative of nonstate sources. The paper concludes that nonstate sources of funding are generally more efficient in promoting output growth.     

Causes of the Long Stagnation of Japan during the 1990s: Financial or Real?

Corporate investment is the most important factor to explain the long stagnation of Japan during the 1990s. Using the Bank of Japan diffusion indices of “real profitability” and “banks' willingness to lend,” we estimate investment functions for four groups of firms: large/small and manufacturing/non-manufacturing. Our results suggest that for large firms, financing constraints are not significant whereas the converse is true for small firms. A fall of investment during 1992–94 is largely explained by real factors. However, the credit crunch occurred beginning 1997 and it lowered the growth rate of GDP by 1.6%. J. Japan. Int. Econ., September 1999, 13,(3), pp. 181–200. Faculty of Economics, Nagasaki University, 4-2-1 Katafuchi, Nagasaki 850-8506, Japan; and Faculty of Economics, University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo 113-0033, Japan. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: E22, E30, G21, N15.     

Modifications of the Balassa–Samuelson Model: The Effects of Balanced Growth and Capital Accumulation

In this paper modified versions of the Balassa–Samuelson model are developed. We stress the effects of balanced productivity growth and capital accumulation, which is often ignored or not fully understood in existing studies. Our theoretical analysis shows that these effects and the differential productivity growth effect can be presented in a unified framework. Empirical estimates using 1970–1990 sectoral data for the OECD show that our modified models are more suited to the data than the commonly used Balassa–Samuelson model. J. Japan. Int. Econ., March 2002, 16(1) pp. 31–49. Faculty of Economics, Nagasaki University, 4-2-1 Katafuchi, Nagasaki 850-8506, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: F36; F41; F43.     

Indonesia’s Year of Democratic Setbacks: Towards a New Phase of Deepening Illiberalism?

This article suggests that 2017 has been a year of distinctive democratic setbacks in Indonesia. It offers a tentative framework that explains how democratic regression is likely to continue by virtue of the further mainstreaming of conservative Islamic morality and reactionary hyper-nationalism in Indonesian political discourse and practice. It contends that such mainstreaming has been a growing feature of intraoligarchic competition in Indonesia, the effect of which is to accentuate longstanding illiberal features within Indonesian democracy. While the article focuses on the conflicts surrounding the highly polarising and emotive Jakarta gubernatorial election of 2017 in order to expand on this framework, other controversies are also discussed, including those regarding corruption eradication and continuing impediments to a national ‘reconciliation’ with former Indonesian communists. Developments in Indonesia are set against a global background characterised by growing threats to liberal democracy and the emergence of anti-pluralist political impulses in a range of societies.     

Income distribution in the mirror of height differences: The case of Spain 1895–1950

Changes in the differences of heights among social groups could indicate shifts in income inequality. However, they can result from other factors as well. This article discusses which factors are these and, hence, which variables should we control for before taking height differences as a proxy for income inequality. An application to Spain from late nineteenth to mid-twentieth century seems to sustain the authors' contentions, and provide some conclusions for this country and time period. Given the scarcity of data on family incomes, this method could prove valuable for the study of the long-run evolution of income distribution in other countries.     

Maquiladoras: Exploitation or Emancipation? An Overview of the Situation of Maquiladora Workers in Honduras

Are offshore assembly workers being exploited or emancipated? The answer depends largely on what factors are being considered and with whom the workers are being compared. This paper presents data on 12 indicators, including both economic and social factors, which together provide an overview of the situation of maquiladora workers in Honduras. Second, it uses an alternative control group, first time applicants to the maquiladoras. Finally, this paper presents data collected in Honduras in 1998—providing insights into the industry as it is operating post-NAFTA and in a non-Mexican setting.     

Determinants of pollution: what do we really know?

The recent literature proposes many variables as significant determinants of pollution. This paper gives an overview of this literature and asks which of these factors have an empirically robust impact on water and air pollution. We apply Extreme Bound Analysis (EBA) on a panel of up to 120 countries covering the period 1960–2001. We find supportive evidence of the existence of the environmental Kuznets curve for water pollution. Furthermore, mainly variables capturing the economic structure of a country affect air and water pollution.     

Botshabelo: The face of ‘orderly urbanisation’?∗

Botshabelo (also known as Onverwacht) is the largest relocation area in South Africa, but very little is known about it. Towards the middle of 1986 a multi‐purpose survey was conducted in this area, covering, among others, topics such as cooperative development, the informal sector, the roles of religion and of women in development. social services and the general experience of urbanisation.

The main research findings centre on the politico‐ideological factors responsible for the establishment of Botshabelo, the consequences of the uncontrolled and uncontrollable urbanisation process, the absence of broad political and social solidarity and the specific forms of dependency facing Botshabelo. The majority of the population of Botshabelo find it difficult to cope with the demands of urban life. Various characteristics of a culture of poverty are present and there is a lack of integrated participation by a wide spectrum of participants in the area as a whole. The way in which Botshabelo came into being is by no means conducive to the formation of a sense of belonging.

Direct efforts have to be launched in order to break the stalemated position of Botshabelo's political, economic and social dependency. In this regard the need for opinion leaders, active involvement by women, the informal sector and cooperative development as well as the necessity for a high degree of participation are listed.     

The effect of foreign direct investment on firm growth: the case of Taiwan’s manufacturers

Foreign direct investment (FDI) can be roughly separated into an expansionary type and a defensive type. Expansionary FDI seeks to exploit the firm-specific advantage in the host country whereas defensive FDI seeks cheap labor in the host country to reduce the cost of production. Based on Taiwanese data, we examine the effects of these two types of FDI on survival and growth performance of investing firms. Both types of FDI are shown to be beneficial to the survival of firms. Expansionary FDI has the additional benefit of contributing to the sales growth of investing firms at home while defensive FDI is neutral to sales growth. Both types of FDI are also shown to be uncorrelated with job creation or job displacement at home. Our results suggest that FDI will strengthen rather than weaken the viability and competitiveness of domestic industries. It cannot be blamed for industrial ‘hollowing-out’.     

On the performance of the foreign subsidiaries of Korean banks: are securities investments really profitable?

This study, by focusing on the securities investments of Korean banks’ foreign subsidiaries, analyzes the background of the increase in those securities investments, the present situation, and the influence of securities investments on performance. The major sources of income for Korean banks’ foreign subsidiaries are composed of loans, foreign exchange activities, and securities investments. However, as loans and foreign exchange activities are not profitable because of high funding costs, tighter supervision in host countries, competition among the Korean banks, and the concentration of exports and imports on specific countries, the foreign subsidiaries of Korean banks have increased the weight of their securities investments. The results of this analysis reveal that securities investments affect negatively on the performance of Korean banks’ foreign subsidiaries, and it strongly suggests that the foreign subsidiaries of Korean banks—short on credit, size, technology, experience, and networking—need more preparation for financial globalization.     

The Fisher Effect Puzzle: A Case of Non-Linear Relationship?

The Fisher effect specifies a positive, one-for-one relationship between the nominal interest rate and expected inflation. Most recent empirical studies on the Fisher equation, typically based on ordinary least squares and co-integration estimation, found that the equation did not fit various data sets well. However, recent empirical studies showed that this fit improves if the Fisher equation is treated as a non-linear equation. Using U.S. quarterly data, this paper examines whether the results of the previous studies on the Fisher equation arose as a direct consequence of specification errors. We use time-varying coefficient (TVC) estimation, a procedure that allows us to directly confront the unknown functional form problem, specification errors, and spurious relationships. We find strong support for the view that, under TVC estimation, the Fisher equation holds and is no longer a puzzle.     

Emporiophobia (Fear of Markets): Cooperation or Competition?

Widespread emporiophobia (fear of markets) has important policy implications, since it leads voters to demand anti‐market policies. There are many reasons for this anti‐market attitude; however, economists could reduce emporiophobia if we stressed cooperation rather than competition in writings and policy discussions. In a sample of introductory textbooks, competition is mentioned on average eight times as often as cooperation. The fundamental economic unit is the transaction, and transactions are cooperative. The benefit of a market economy—increased consumer surplus—comes from cooperation through transactions, not from competition. Competition in a market economy is competition for the right to cooperate. Competition is important because it guarantees that the best cooperators will win and because it establishes the efficient terms for cooperation, but cooperation is fundamental. For most people, competition has negative connotations since it focuses on losers, while cooperation implies a win–win situation. Other implications involve the morality of the market, “giving back,” and characteristics of market failures.     

The Structure of Indonesian Manufacturing Industry: An Input-Output Approach∗

The paper examines the structure of Indonesia's manufacturing sector, using data from the 1980 input-output tables., and supporting data from various industrial surveys and national accounts. An input-output analysis of sectoral linkages and factor demand (labour, proxies for skill and capital, imports) is used to derive implications for growth and employment of two contrasting industrial development strategies — a labour-intensive strategy and a more capital-intensive strategy fostering basic industries. It is argued that a labour-intensive, resource-based, and export-oriented strategy combined with selective import substitution is most likely to achieve the stated development goals of the Indonesian government.

     

Simple analytics of segmented markets: What case for liberalization?

Discussion about the liberalization of controlled markets in developing countries frequently assumes that the removal of price or quantity restrictions will lead rapidly to increased marketed output. However, when parallel markets exist, market controls may not depress marketed output and may actually increase it. Conversely, liberalization may not increase marketed output much, if at all. The benefits of liberalization will be greater where parallel markets are costly to enter, so that decontrol increases efficiency, and scarce resources such as entrepreneurial and administrative ability are diverted into the rent-seeking activity of gaining access to illegal parallel markets. This paper employs partial equilibrium techniques to analyze market controls and liberalization in the presence of parallel markets for foodgrains, credit, labor, and foreign exchange.     

Hurricane Katrina: Was There a Political Economy of Death?

An empirical implication of egalitarianism in the provision of public disaster relief services is that the probability of surviving a natural disaster should not be conditioned on a household’s position in the income distribution, or its racial characteristics. In this paper, we utilize data on deaths attributed to Hurricane Katrina in the City of New Orleans to estimate a political economy model of the public provision of disaster rescue services. Parameter estimates reveal that the probability of dying as a result of Hurricane Katrina, at both the census tract and individual level, increased with respect to being black and poor. Our results suggest that there was a departure from egalitarian principles in the provision of public disaster rescue services during Hurricane Katrina, and are consistent with a political economy of race and class governing decisions about the allocation of public resources to ameliorate population environmental risks.