Pass-through in dollarized countries: should Ecuador abandon the US dollar?

In this article, we examine the convenience of dollarization for Ecuador today. As Ecuador is strongly integrated financially and commercially with the United States, the exchange rate pass-through should be zero. However, we sustain that rising rates of imports from trade partners other than the United States and subsequent real effective exchange rate depreciations are causing the pass-through to move away from zero. Here, in the framework of the Vector Error Correction Model, we analyse the impulse response function and variance decomposition of the inflation variable. We show that the developing economy of Ecuador is importing inflation from its main trading partners, most of them emerging countries with appreciated currencies. We argue that if Ecuador recovered both its monetary and exchange rate instruments, it would be able to fight against inflation. We believe such an analysis could be extended to other countries with pegged exchange rate regimes.     

Scarcity of Resources in a Sraffian Framework of International Trade

This paper deals with the theory of differential rent within a Sraffian small open economy. Its aim is to study the determination of the wage rate, the rent rates and the activity level of each productive process when the profit rate is given, and either the vector of final demand, or the available homogenous labour, is exogenously set. It also analyses the relation between the total value of the net product and the labour employed and shows that it is not monotonic.     

EU vor der Zerreißprobe – wie sieht die gemeinsame Zukunft aus?

In the midst of the EU’s current “polycrisis “, several serious dangers threaten the future of Europe’s unity. The looming Brexit vote as well as the refugee crisis and–above all–the rise of nationalistic, right-wing extremist parties demonstrate the fragility of the EU. One of the EU’s fundamental problems is its institutional design in general. In particular the role of the European Central Bank is not fit for the challenges of the time. Moreover, the EU is facing disintegrative pressures while simultaneously pursuing moves towards deepening the Union as a reaction to the multiple crises. Against this background, it is highly likely that differentiation within the EU will increase. Deeper cooperation among small groups of member states will likely increase efficiency but may also reduce transparency, accountability and cohesion within the EU. If handled well, differentiation may also open new pathways for cooperation with the EU’s neighbours and accession countries. The foundation for a fresh start in Europe is the Franco-German relationship, as only these two Member States together can prevent Euroscepticism from spreading even further and the new radical right from taking control of Europe.     

Bunkering competition and competitiveness at the ports of the Gibraltar Strait

This article provides an exploratory analysis from the perspective of the port operators of the factors that determine the competitiveness of fuel supply at the ports of the Gibraltar Strait (Bay of Algeciras, Gibraltar and Ceuta). The methodology is based on interviews and questionnaires focused on public and private institutions involved in the port services. The results reveal that fuel prices and geographical advantage are the two main factors seen by Gibraltar Strait port operators as influencing shipping company choice of bunkering port. In order of importance, other identified factors related to the cost and quality of services, including port tariffs, supply waiting time, service rates, simplicity of crew changing, presence of restrictive environmental regulations and customs strictness.     

Testing assumptions underlying economic research on transgenic food crops for Third World farmers: Evidence from Cuba, Guatemala and Mexico

Transgenic crop varieties (TGVs) are being promoted as essential for improving small-scale Third World (SSTW) agriculture. Most economic research on this topic makes critical, untested assumptions, including that farmers will choose TGVs over other varieties because TGVs are economically optimal and because farmers are risk neutral profit maximizers. We tested these assumptions using data from a survey of 334 farmers in 6 communities in Cuba, Guatemala and Mexico in which farmers ranked 4 real and hypothetical maize varieties for eating and sowing. Our results did not support these assumptions. Most farmers preferred farmer varieties for sowing and especially for eating, avoiding TGVs, a preference associated with being risk averse and with non-monetary preferences. Farmers more integrated into modern agriculture were more likely to choose TGVs. These results suggest that farmers most in need of support and most important for conserving genetic diversity are least favorable toward TGVs, and that alternative ways of improving SSTW agriculture should receive more attention.     

Fiscal Shocks and the Current Account in the Redux Model: Evidence from the Italian Economy

The main goal of this paper is to study the effects of fiscal policy on the current account in the Italian economy through the analysis of one of the most innovative intertemporal models of recent years, the Obstfeld–Rogoff Redux model. The author proposes an innovative econometric approach to the model, based on the estimation of the microeconomic parameters that appear in its fundamental equations. The estimated parameters are used to empirically determine the multipliers that, according to the theory, connect permanent and temporary variations in public expenditure to the current account. Estimation is carried out on a dynamic extension of the original model, which has been developed modifying the first order conditions system of the maximization problem. Finally, the author provides a comparison between the results obtained and the actual dynamics of the Italian current account balance.     

Regulation and rent‐seeking: The role of the distribution of political and economic power

It is shown that the joint distribution of economic and political power plays a key role in determining regulatory and tax policies of national and subnational governments. If both economic and political power are evenly distributed across individuals, then regulatory and tax policies are efficient, but if they are unevenly distributed and positively correlated, then regulatory policy is used by subnational governments to redistribute income in favor of individuals with higher economic and political power at the expense of productivity and output. Consequently, the national government has to raise the tax rate to finance public expenditure. Moreover, if there exists a positive correlation between economic and political power, then the higher the fiscal gap, the larger the gap between equilibrium and efficient policies because subnational governments underestimate more the fall of public revenues caused by inefficient policies.