Valuing the non-timber forest products in the Mediterranean region

The potential of non-timber forest products (NTFPs) in the Mediterranean region as a source of livelihood and sustainable development has been widely recognized. Yet, surprisingly few efforts have been made to value them comprehensively. Valuation efforts usually focused on selected NTFPs traded on formal markets, at local level. This paper aims to provide comprehensive estimates of NTFPs benefits at national and regional level in the Mediterranean region. Six major groups of NTFPs are identified: firewood, cork, fodder, mushrooms, honey and other NTFPs. Valuation is based on a wide variety of techniques, drawing on official statistics, and supplemented by results of local surveys. It shows that at Mediterranean level, NTFPs provide annual benefits of about €39/ha of forests, accounting for about a fourth of the total economic value of forests estimated by this study. The average estimate for southern countries (€54/ha) is considerably higher than for northern (€41/ha) and eastern countries (€20/ha). The paper reveals the degree of importance of the main NTFPs benefits for the country groups and the region as a whole. It also discusses some reasons of concern when drawing policy tools for improving rural income and forest conservation in the Mediterranean.     

Multinationals and the gains from international diversification

This paper employs mean–variance spanning tests to examine the diversification potential of multinational firms and foreign market indices from the perspective of investors in the G7 countries over the 1984–1995 period. We find evidence that multinational corporations may have provided diversification benefits for investors in Germany and the United States. We find that the addition of foreign market indices to a domestic portfolio—inclusive of multinationals—provided substantial diversification benefits in all countries. The economic importance of the shift of the portfolio frontier varied considerably across markets.     

Global capital markets,housing prices,and partisan fiscal policies

In recent years, global imbalances have channeled the excess savings of surplus countries toward the real estate markets of deficit countries. By consequence, the deficit countries that attracted lots of foreign capital experienced large run‐ups in house prices, whereas most surplus countries that exported capital exhibited flat or slow house price growth. We first use new house price data and a novel instrumental variable design to show the causal relationship between housing prices and capital inflows, particularly through debt bonanzas. We then argue that international capital flows affect the fiscal policy preferences of both voters and political parties by way of their impact on housing prices. Where capital inflows are large and housing prices are rising, we expect voters to respond by demanding both lower taxes and less publicly‐provided social insurance because rising house prices allow homeowners to self‐insure against income loss. In contrast, declining house prices produce greater demands for social insurance, particularly among those most exposed to housing market risk. We present evidence from two cross‐national surveys that supports these claims, as well as a “before and after” analysis of the housing crash in Eastern Europe. We also show that the connection between house prices and social policy also manifests itself in government spending outcomes, mediated by partisan control.     

The Feldstein–Horioka puzzle across EU members: Evidence from the ARDL bounds approach and panel data

This paper addresses the saving-investment (SI) correlation for the EU15 member countries, using the ARDL approach and panel regressions. If we accept the Feldstein–Horioka [Feldstein, M. and C. Horioka, 1980, Domestic saving and international capital flows, Economic Journal 90, 314–329.] interpretation of the SI correlation, the evidence from the ARDL approach does not point to any particular direction in terms of country size, or level of development, or economic and capital market structure. Panel regressions yield an SI coefficient in the range of 0.148–0.157. This finding is attributed to higher capital mobility, lower transaction costs in the international capital markets, and the declining status of long-run current account targeting as a primary government objective.     

The London Business School econometric model of the UK

This paper describes the London Business School econometric model — the first fully computerized model of the UK — which has been used for regular public forecasting since 1966. The model, estimated on quarterly data, is organized around the income expenditure accounts with a fully integrated flow of funds sector which ensures consistency between portfolio decisions and income, savings and investment decisions. Aggregate demand is built up from its individual components so that demand influences are important for the short- and medium-term behaviour of the model. But there are important supply-side effects which work through the real exchange rate and real wages. Monetary conditions have a powerfull effect on the model through the exchange rate, personal sector wealth and interest rates. Wages and employment are determined in a labour market in which employment decisions depend on the level of demand and real wages while real wages depend on the level of unemployment, real benefits and direct and indirect taxes as well as underlying trends in productivity. Asset prices move in any period to clear both the spot and the future market in assets so that current asset prices in the equity, gilt-edged and foreign exchange markets reflect all current information about the expected state of the economy. In contrast, goods prices adjust sluggishly. The combination of continuously clearing asset markets and sluggish wages and prices gives the model many of the theoretical characteristics associated with the open-economy models of Dornbusch and Buiter and Miller.     

Does international openness affect the productivity of local firms?

This paper examines how international openness can change firm productivity in south‐eastern Europe (SEE), a crucial question for middle‐income countries. Using firm‐level data for six transition economies over the 1995–2002 period, we identify whether foreign ownership and propensity to trade with more advanced countries can bring about higher learning effects. We find that: (i) foreign ownership has helped restructure and enhance the productivity of local firms in four out of six countries; (ii) exporting to advanced markets has a larger impact on productivity growth in four countries, especially when the firm's absorptive capacity is taken into account; (iii) in contrast, exporting to the less competitive markets of the former Yugoslavia seems to negatively affect productivity growth in three countries; and (iv) learning effects from importing are similar to those from exporting. Our results suggest that trade liberalization is not uniformly beneficial. Regional composition of trade flows and absorptive capacity of local firms matter. Thus, trade liberalization within the SEE region may not provide a substitute for a general trade liberalization which includes access to the more competitive markets of countries belonging to the Organization for Economic Co‐operation and Development.     

On the determination of real interest rates in Europe

In this paper a loanable funds model is estimated over the period 1959–1990 for the determination of after-tax expected real interest rates using aggregated data for four European countries under the assumption that high capital mobility in Europe implies a common capital market. It is concluded that real interest rates in the European Community were mainly driven by movements in temporary income, expected inflation, lagged investment, money growth, and the oil price. Moreover, our aggregate, model appears to be reasonably stable. Finally, individual country rates are shown to depend on the European rate as well as some country-specific variables, suggesting a limited degree of isolation from international financial markets for the countries concerned.At the time of writing the author was still affiliated with the Department of Economics at the University of Groningen. Hence, any views expressed here are those of the author and do not necessarily represent those of De Nederlandsche Bank. This paper benefitted very much from stimulating comments made by Willem Buiter, Kanhaya Gupta, Jakob de Haan, Flip de Kam, Kees Koedijk, and an anonymous referee. The author would like to thank Jan-Egbert Sturm for technical assistence. Of course, the usual disclaimer applies.     

Democracy and growth

Growth and democracy (subjective indexes of political freedom) are analyzed for a panel of about 100 countries from 1960 to 1990. The favorable effects on growth include maintenance of the rule of law, free markets, small government consumption, and high human capital. Once these kinds of variables and the initial level of real per capita GDP are held constant, the overall effect of democracy on growth is weakly negative. There is a suggestion of a nonlinear relationship in which more democracy enhances growth at low levels of political freedom but depresses growth when a moderate level of freedom has already been attained. Improvements in the standard of living—measured by GDP, health status, and education—substantially raise the probability that political freedoms will grow. These results allow for predictions about which countries will become more or less democratic over time.     

ASIAN FINANCIAL LINKAGE: MACRO‐FINANCE DISSONANCE

How are Asian financial markets interlinked and how are they linked to markets in developed countries? What is the main driver of fluctuations in Asian financial markets as well as real economic activity? To answer these questions, we estimate the spillover index proposed by Diebold and Yilmaz and gauge the degree of interaction in both financial markets and real economic activity among Asian economies. We first show that the degree of the international spillover in stock markets is uniform, irrespective of the groups of countries concerned, such as the G3 and ASEAN4. This suggests the importance of global common shocks in stock markets. We then discuss the macro‐finance dissonance. In stock and bond markets, the United States has been the main driver of fluctuations. However, China has emerged as an important source of fluctuations in real economic activity.     

Balances of payments and exchange markets: A lost correspondence

The article presents an accounting framework capable of consistently describing on a worldwide scale international money (euro-currency) markets. It also shows that, in such a framework, interest rates on international money markets need not be explained by econometric models specific to such international markets, but could simply result from the appropriate aggregation of national econometric models. Finally, the author emphasizes that in a world in which a country's money can be created by the banking systems of other countries, the correspondence between a country's balance of payments equilibrium and the foreign exchange market for its own money is no longer valid.     

Growth of developing countries and world interest rates

On the basis of aggregate data covering the period 1973–1982, this note argues that the rate of growth of non-oil developing countries is influenced significantly by the growth performance of industrial countries and by the level of the real rate of interest on world markets. At the same time, no evidence was found to support the hypothesis that the nominal rate of interest has an effect on growth in non-oil developing countries.     

Do oil producing countries offer international diversification benefits? Evidence from GCC countries

This paper provides evidence of the existence of diversification benefits in international stock markets when oil producing countries are included in a global portfolio. Moreover, it examines whether recent oil shocks and financial events have significant impact on the conditional correlations and diversification benefits. Using stock returns from developed, emerging, GCC countries and a global portfolio, the empirical findings show that while developed and emerging stock markets have experienced increased correlations over relatively long periods of time, the correlation in GCC stock markets remained low and constant offering high diversification benefits. Interestingly, the paper also finds that, during 2012–2014, the rising conditional correlation levels have reversed trends in developed and emerging markets alike offering more potential for international diversification. Our results are robust to model selection, data frequency, and innovations distribution.     

The ‘real’ explanation of the Feldstein–Horioka puzzle

This article shows that global capital markets cannot, by themselves, achieve net transfers of financial capital between countries and that both the integration of global financial markets and the integration of global goods markets are needed to achieve net transfers of capital between countries. Frictions (barriers to mobility) in one or both of these markets can impede net transfers of capital between countries, produce the Feldstein and Horioka (1980) results and prevent real interest rates from being equalized across countries. Moreover, there is empirical evidence that barriers to the mobility of goods and services are an important obstacle to international capital mobility.     

应对新冠疫情冲击的货币政策国际协调

新冠疫情冲击了世界经济增长和金融市场稳定。很多国家推出极度宽松货币政策应对危机。从经典货币政策国际协调的博弈理论来看,应对本次疫情冲击的各国货币政策协调性不足,“以邻为壑”的非合作均衡效果明显。为数不多的货币政策协调也存在执行力不足、深度与广度不够、新兴市场国家话语权低等问题。在世界经济紧密联系、货币政策溢出效应加强的背景下,为了应对疫情冲击,国际组织需要创设协议和合作剩余分配机制,寻找货币政策刺激效果和防止国际资产泡沫之间的平衡,加强政策沟通和信息共享,提高新兴市场国家话语权,建设有效的应对危机的货币政策国际协调机制。中国应在“一带一路”倡议的框架下建立长期货币政策协调机制,在现有的IMF和G20等平台上发挥发达国家与新兴市场国家之间的协调桥梁作用,通过持续开展央行间技术性合作等措施参与和推进协调进程。     

Trade prices and supply in the UK economy

Current account imbalances are a major source of instability in the world monetary and trading system. Measures to correct these imbalances have largely involved adjustments to exchange rates. In the international trade literature, when the current account is in deficit, the Marshall-Lerner condition is sufficient for a successful devaluation. However, this partial equilibrium condition — apart from being based on the assumption that supply elasticities are infinite — abstracts from how the domestic economy responds to the change in relative prices. In this paper we develop a model of price and output determination in an open economy with imperpectly competitive markets, and draw a distinction between goods which are exported and those which are supplied to the domestic market. This means that we have to determine jointly both export prices and the domestic price of house sales. We show that as long as there is no money illusion in the labour market a fall in the nominal exchange rate raises domestic and export prices proportionally and leaves trade volumes unaffected. However, shifts in domestic absorption relative to overseas demand — by changing relative prices — cause shifts in the relative supply of exports and domestically sold goods and affect the trade balance. Thus fiscal and monetary measures directed towards reducing domestic absorption are more likely to be successful in correcting current account imbalances than exchange rate depreciation.     

Sunspots and incomplete financial markets: The general case

Summary This paper examines the effects of extrinsic uncertainty or sunspots on competitive equilibrium when financial markets are incomplete. For the canonical two-period, pure-exchange model with bonds (or so-called nominal assets, yielding fixed overall returns specified in units of account, and including pure inside money), the following result is established: Generically in endowments, if there areS sunspot states in the second period, but only 0<I<S distinct types of bonds, then — corresponding to the inherent deficiency in the financial markets — sunspots will generateD=S–I dimensions of consumption allocation or real (as well as spot price or nominal) indeterminacy.     

Cross-subsidization and cost misallocation by regulated monopolists

While cross-subsidization is understood theoretically as involving the sustainability of a cost allocation scheme, it is invoked in regulatory policy contexts, such as the divestiture of AT&T, where costs of serving unregulated markets may be borne by ratepayers of regulated monopolies. We analyze two cross-subsidization tactics—cost misallocation and distorted technological choice — under a spectrum of regulatory cost allocation policies. These tactics lead to higher prices in regulated markets and inefficient production in unregulated markets. Welfare effects are discussed; we conclude with observations on strategic behavior and regulatory policy.     

NEW INSIGHTS INTO THE STRUCTURE OF THE WORLD ECONOMY*

The United Nations' newly completed study of purchasing power parities covering 34 countries varied in region, income level, and form of economic organization shows the systematic differences between the usual view of the structure of the world economy arising out of international comparisons based upon foreign exchange rate conversions and the structure one sees when actual prices are available. The real per capita GDP of developing countries is understated relative to developed countries when exchange rates are used in converting countries' national income accounts to a common currency, with the degree of understatement for any two countries being inversely related to the per capita income difference between them. The reason for this is that relative prices in the non-traded goods sector are lower relative to traded goods prices in low income countries. The systematic pattern observed in the 1975 data of the 34 countries has been extrapolated over time and space to get estimates of GDP for other years and countries. In the absence of detailed price data, the real shares of final expenditures devoted to particular components of the total can only be estimated as the proportion of own currency total expenditure devoted to the components. The observed differences in the pattern of prices of poor countries relative to rich for different components makes this clearly wrong for international comparisons, and in systematic ways. For example, (i) the relative price of services compared with commodities in poor countries is lower than in rich; so the apparent tendency of the share of services to rise as a country's income rises disappears when real quantities are considered; similarly, (ii) the relative price of capital goods is greater in poor countries compared with rich ones, so the difference in investment ratios out of GDP between rich and poor countries is understated.     

Equality of interest rates revisited: the multi‐country evidence

One influential aspect of international integration of financial markets is the possibility of reducing divergences between domestic interest rates and foreign interest rates or increasing the degree to which yields in different financial markets move together over time. In this study, we investigate the convergence of the real interest rates using the Kalman filter. Applying the modified Hall et al. () approach, we model the risk premium and convergence of real interest rates using the time‐varying parameter estimation techniques. We present evidence of risk premium and convergence for two blocks of countries—The Asian‐Pacific countries including the US, Japan, Taiwan and South Korea and the US‐European group including France, the UK, Germany and the US.     

Real exchange rates, preferences, and incomplete markets: evidence, 1961–2001

Abstract.  Many international macroeconomic models link the real exchange rate to a ratio of marginal utilities. We examine this link empirically, allowing the marginal utility of consumption to depend on government expenditure, real money balances, or external habit. We also consider two environments with incomplete asset markets; one with exogenously missing markets but an endogenous discount rate that anchors the distribution of wealth and one with endogenous market segmentation. Although none of these satisfies theoretical and over‐identifying restrictions for every country, utility with external habit persistence provides the best match with real exchange rates for OECD countries between 1961 and 2001. JEL classification: F41