Monetary unions, external shocks and economic performance: A Latin American perspective

During the last few years there has been a renewed analysis in currency unions as a form of monetary arrangement. This new interest has been largely triggered by the Euro experience. Scholars and policy makers have asked about the optimal number of currencies in the world economy. They have analyzed whether different countries satisfy the traditional “optimal currency area” criteria. These include, among other: (a) the synchronization of the business cycle; (b) the degree of factor mobility; and (c) the extent of trade and financial integration. In this paper I analyze the desirability of a monetary union from a Latin American perspective. First, I review the existing literature on the subject. Second, I use a large data set to analyze the evidence on economic performance in currency union countries. I investigate these countries’ performance on four dimensions: (a) whether countries without a national currency have a lower occurrence of “sudden stop” episodes; (b) whether they have a lower occurrence of “current account reversal” episodes; (c) what is their ability to absorb international terms of trade shocks; and (d) what is their ability to absorb “sudden stops” and “current account reversals” shocks. I find that belonging to a currency union has not lower the probability of facing a sudden stop or a current account reversal. I also find that external shocks have been amplified in currency union countries. The degree of amplification is particularly large when compared to flexible exchange rate countries.     

Tax incentive and corporate financial performance: Evidence from income tax revenue sharing reform in China

How to stimulate corporate performance is a crucial issue of general concern in all countries. This paper examines how China’s Income Tax Revenue Sharing Reform in 2002 affects corporate financial performance. Unlike general tax policies that directly adjust the nominal tax rate or depreciation allowance, this reform indirectly affects the effective Enterprise Income Tax (EIT) rate by switching tax administration, thereby affecting corporate financial performance. We use a firm-level data-set from Annual Survey of Industrial Firms (ASIF), and test the impact by using a quasi-natural experimental design through regression discontinuity design (RDD). We find that after the reform, the effective EIT rate (ETR) of enterprises collected EIT by State Administration of Taxation (SAT) was 10% lower than that of enterprises collected EIT by the Local Administration of Taxation (LAT). If the ETR reduces by 1%, corporate financial performance, more specific, Return on Asset (ROA), increases by 1.7%. There are two available channels: increasing fixed asset investment (FAI), and alleviating external financial constraints. Additionally, the impact can be weakened for locally SOEs, large firms, firms with low SA index and those in less competitive industries.     

The government revenue and government expenditure nexus: empirical evidence from nine Asian countries

The nexus between government revenue and government expenditure has been an important topic in public economics. In this paper, we investigate evidence for cointegration and causality between government revenue and government expenditure for nine Asian countries. We use the recently developed bounds testing approach to cointegration and the conventional F-test to examine Granger causality. Our empirical results suggest that for three out of the nine countries government revenue and government expenditure are cointegrated. Our results on the direction of causation are mixed: (a) for Indonesia, Singapore, Sri Lanka in the short-run and for Nepal in both the short- and long-run we find support for the tax-and-spend hypothesis; (b) Indonesia and Sri Lanka are in conformity with the spend-and-tax hypothesis in the long-run; and (c) for other countries there is evidence of neutrality.     

Untangling the web of causalities among four disaggregate government expenditures,government revenue and output in Taiwan

Using Taiwan data, this empirical study delves into the causal links among four disaggregate real government expenditures, real government revenue and real output. The results substantiate that there is (i) neutrality between real government revenue and real government expenditure on economic development; (ii) unidirectional causality from real government revenue to real government expenditures on national defence, on general administration and on education, science and culture, confirming the tax-and-spend hypothesis; (iii) neutrality between output and the four disaggregate government expenditures; and (iv) unidirectional causality from real output to real government revenue. Several implications emerge from our empirical results.     

Implications of revenue sharing for black political and economic goals

Conclusions Thus far urban development has been subject to the “regulation” of forces generated by the market economy. Such planning as has existed has been overwhelmed by the dynamics of market forces, perverted priorities, political fragmentation and economic differentiation. The joint goals of removing the “crisis” elements of urban growth and of expanding black political potential have provided the framework in which we have analyzed revenue sharing. We have analyzed the specific Nixon and Mills proposals as well as the general idea of revenue sharing, and compared revenue sharing proposals to present Federal aid to state and local governments.     

Comments on S. Edwards: “Monetary unions, external shocks and economic performance: a Latin American perspective”

I discuss Sebastian Edwards’ most recent paper with great pleasure. As so much of the work of this distinguished economist, this paper provides new insights on a burning issue in international economics. Here Edwards provides empirical evidence on the resilience to external shocks of countries that lack a national currency (“monetary-union” or MU countries). The paper starts by reviewing the issues and literature relevant on exchange-rate regimes, dollarization, and MU in Latin America, with an emphasis on the question if countries in the region satisfy key optimal currency area criteria. Then the paper provides extensive new evidence on economic performance in MU countries, in comparison to countries with a national currency, using a large world panel sample. Performance tests are conducted for the comparative likelihood of MU countries of sudden stops in capital flows (SS) and large current (deficit) reversals (CAR), as well as their ability to absorb terms-of-trade shocks, SS, and CAR. The results are generally negative and significant for the comparative performance of MU countries. To set the stage, I start my comments by documenting first how country selection of exchange-rate and monetary regimes is quickly evolving in the world during the last decades, discussing subsequently how economists’ views follow suit (Section 1). Then I discuss some aspects of Edwards’ paper, focusing in particular on the data and model specification (Section 2). I end with brief implications for exchange-rate and monetary regime choice in Latin America.     

Examining the impact of high-speed railways on land value and government revenue: Evidence from China

The Beijing-Shanghai high-speed railway operates at 300 km per hour to connect two of the most important Chinese cities within a travel time of 5 h. By exploiting a unique government land sale dataset, this paper investigates the impact of this high-speed railway on land price and then on the local government revenue. We show that the BSH generally increases the land price by about 87%, which amounts to about RMB 99 billion (around USD 14 billion) more in government land sale revenue or helps to cover about 45% of its construction cost. Furthermore, we show the heterogeneity of the impacts of the BSH on the prices of different types of land. Specifically, we find that residential land located within 3 km from a BSH station experiences a price increase of 278%. This effect is weaker for mixed-use land. Our finding shows that high-speed railway itself could serve as a key channel of infrastructure financing and government revenue sources.     

Indonesia's economic performance in comparative perspective and a new policy framework for 2049

This is the first paper of a planned ‘Indonesia 2049’ project, which asks how far Indonesia's economy will have developed 100 years after actual political independence in 1949. We compare dimensions of Indonesia's economy with those of two oil exporters (Mexico and Nigeria), three large populous developing economies (China, India and Brazil) and three Southeast Asian neighbours (Malaysia, Thailand and the Philippines). Under Soeharto, Indonesia's economic performance was better than it had been under Soekarno, and above the average of the eight comparator countries, but below that of the East Asian economies. Our view is that Susilo Bambang Yudhoyono's second administration must adopt a new economic policy framework to ensure successful transition to knowledge-based growth. This proposed new framework goes beyond the Washington Consensus of ‘getting prices right’ and ‘getting institutions right’ to include ‘getting the role of science right’ and ‘getting the conception of the reform process right’.     

Race and social organization: An economic perspective

Conclusion Improvements in the economic, political, and social status of Blacks are joint effects. Improvement in one is unlikely without concommitant improvements in the others; this is a multiedge sword.Success in any of the areas is correlated with improvement in the others—synergism. On the other hand, failure to realize the interdependencies makes success or improvement in any of the areas unlikely.     

Money,interest rate spreads,and economic activity

Money, Interest Rate Spreads, and Economic Activity. —Numerous empirical studies for industrial countries have shown that the term structure of interest rates is a good indicator for future output growth. This paper analyzes whether the interest rate spread contains any additional predictive power if the model includes the money stock. A multivariate error-correction framework is applied to three European economies — France, Germany, and Italy. Granger causality tests are performed for various monetary aggregates and the term structure. The evidence concerning the marginal information content is mixed: For France and Italy, the term structure does not improve the results of the basic model whereas it is significant for Germany.     

汇率、货币政策与经济增长

一、名义汇率与实际汇率我们知道,汇率的变化会对国际贸易产生直接的影响。例如,当本币贬值时,以外币表示的本国出口商品价格下降,这使本国商品在国际市场上的竞争力增强,进而促进本国的出口增长。但是这里所说的汇率变化是名义汇率的变化还是实际汇率的变化呢?对于这个问题,我     

Tax policy and reform in Asian countries: Thailand''s perspective

This paper gives overviews of Thailand's tax system covering major taxes administered by the central government and the local taxes administered by the local government. Recent tax reform experiences are discussed at length starting from the introduction of value added tax (VAT) replacing the business tax to customs tariff reform. Current issues on taxation are also highlighted ranging from tax base, direct and indirect taxation, decentralization impediments. Furthermore, the government is implementing modern and cutting-edge technology in tax administration, thereby providing effective and efficient e-government services to the Thai people. This paper discusses the Roadmap for Tax Reform that would outline the framework for future direction of taxation in Thailand. Finally, the paper gives important insights on tax issues, and draws important conclusions for the future of tax reform in Thailand.     

Bribery and firm performance in India: A political economy perspective

This study examines how corruption affects firm performance in India using data from the World Bank Enterprise Survey for 2013-14. A set of testable hypotheses is formulated with regard to the interaction between bribery and the political environment to capture the nuances of the effect of corruption on firm performance. To overcome endogeneity between bribery and firm performance, the study employs two-stage least squares instrumental variables estimation. The foremost finding is that bribery has significantly negative effects on firm profitability and labor productivity. This finding confirms the hypothesis that in India bribery “sands the wheels” of business. A further finding is that the negative effect of bribery on productivity is stronger in states run by right leaning parties, although there is no significant effect of party orientation on the relationship between bribery and profitability. This finding supports the hypothesis that tighter connections between business and government facilitate rent seeking that undermines productivity even as profitability is unencumbered. Finally, bribery is found to have more harmful effects on smaller and older firms than on larger and younger ones.