NEW ESTIMATES OF TOTAL FACTOR PRODUCTIVITY GROWTH IN INDONESIAN MANUFACTURING

This paper estimates new elasticities of value added with respect to labour and capital in Indonesian manufacturing, controlling for the simultaneity problem that potentially exists between the choice of input levels and a productivity shock (such as an increase in productivity due to new production processes), for plant exit, and for quasi-constant unobservable plant characteristics. It does so by applying the Levinsohn and Petrin (2003) production function estimator to plant-level value added, fixed assets, labour, and electricity consumption data over the period 1988–95. This methodology allows us to revisit the previously used growth accounting based elasticities, and thereby improves total factor productivity (TFP) estimates. The results show that, in the period under study, aggregate TFP growth in Indonesian manufacturing was higher than had previously been estimated.     

Micro-entrepreneurship in a hostile environment: evidence from Indonesia

The contribution of micro-entrepreneurship to development has featured prominently in recent economic and policy debates. Using panel data from the Indonesia Family Life Survey over a long period (1993–2007) marked by an important economic crisis in 1997, this paper investigates the impact of financial, human and social capital on households’ participation in micro-entrepreneurship, while accounting for corruption as well as institutional and infrastructure quality. Larger urban households that have greater financial and social capital, and/or whose members have an elementary or secondary education, are more likely to participate. Corruption at the local parliament and local government levels reduces the number of participants, while higher-quality formal institutions and infrastructure boost entrepreneurship. The period is marked by a rise in participation in 2000, but communities that experienced a loss in well-being due to the crisis were less likely to participate in micro-entrepreneurship.     

Currency Misalignments and Exchange Rate Regimes in Emerging and Developing Countries*

Pegged exchange rates are often pointed out as more prone to risk of overvaluation, because their real exchange rates have a tendency to appreciate. We check this assumption empirically over a large sample of emerging and developing countries, by using two databases for de facto classifications by Levy‐Yeyati and Sturzenegger (2003 ) and by Reinhart and Rogoff (2004 ). We assess currency misalignments by estimating real equilibrium exchange rates taking into account a Balassa effect and the impact of net foreign assets. Pegged currencies are shown to be more overvalued than floating ones.     

Partial Delegation in a Model of Currency Crisis

This paper shows that, in a fixed exchange-rate system with an escape clause, delegating the decision on the magnitude of realignment to an inflation-averse central banker reduces the range of realignment costs for which the policy-maker necessarily devalues. Stressing the influence of devaluation expectations on currency crises, it is also shown that this strategy of delegation reduces the width of the multiple equilibria zone within which self-fulfilling crises occur, thus promoting further the exchange-rate system's stability. The higher the central banker's degree of inflation aversion, the greater is this reduction.     

The optimal neglect of inflation: An alternative interpretation of UK monetary policy during the “Great Moderation”

This paper argues that UK monetary policymakers did not respond to the inflation rate during most of the “Great Moderation” that ran from the early 1990s to the mid-2000s. We derive a generalisation of the New Keynesian Phillips curve in which inflation is a non-linear function of the output gap and show that the optimal response of the policy rule to inflation depends on the slope of the Phillips curve; if this is flat, manipulation of aggregate demand through monetary policy does not affect inflation and so policymakers cannot affect inflation. We estimate the monetary policy rules implied by a variety of alternative Phillips curves; our preferred model is based on a Phillips curve that is flat when output is close to equilibrium. We find that policy rates do not respond to inflation when the output gap is small, a situation that characterised most of the “Great Moderation” period.     

Contagion inside the credit default swaps market: The case of the GM and Ford crisis in 2005

We study the General Motors (GM) and Ford crisis in 2005 in order to determine if the credit default swap (CDS) market is subject to contagion effects. Has the crisis spread to the whole (CDS) market? To answer this question, we study the correlations between CDS premia, by using a sample of 226 CDSs on major US and European firms. We do evidence a significant rise in correlations during the crisis episode, but little “shift-contagion” as defined by Forbes and Rigobon (2002). When using dynamic measures of correlations (EWMA and DCC-GARCH), we also show that correlations significantly increased during the crisis, especially in the first week.     

After Van Gogh: The Geopolitics of the Tsunami Relief Effort in the Netherlands

The paper examines the Dutch humanitarian response to the 2004 Indian Ocean earthquake through the lens of geopolitics. It analyses the ways geopolitical representations shape non-state collective action, in this case the relief effort to help victims of the tsunami of 26 December 2004. Drawing on earlier work on geopolitical visions and national identity, the paper develops a framework to study people's geopolitics, the geopolitics of non-state collective actions. These insights are further explored through an examination of the Dutch tsunami relief effort. The paper discusses how the Dutch media framed this collective action as a national effort and articulated a sense of proximity and responsibility to mobilise people's generosity. Dutch geopolitical vision and national identity (water as a major threat to the national territory, the country's role as development aid donor, its relation to the regions affected) offer a frame to mobilise people. The tsunami is also analysed as a critical event for Dutch geopolitical representations and the tsunami relief effort as a peak experience providing a sense of recovered national identity in times when Dutch society was painfully divided between Muslims and non-Muslims after the murder of Theo van Gogh in November 2004. The concluding section discusses directions for further research into people's geopolitics.     

Mill versus Jevons on traditional sexual division of labour: Is gender equality efficient?

Abstract

The question of the legitimacy of traditional sexual division of labour receives growing attention from contemporary economists. In particular, a debate takes place between the “New Home Economics”, which stresses the efficiency of the traditional arrangement and economists questioning the justice of the relations between sexes. The same kind of opposition appears between two Victorian economists: J.S. Mill and W.S. Jevons. Although both are utilitarian, they adopt contrary views about the relative importance of efficiency and justice in the definition of appropriate gender relations. While Mill aims at conciliating justice and utility, Jevons considers that utility outweighs justice.     

Non-linear and non-symmetric exchange-rate adjustment: Evidence from medium- and high-inflation countries

This paper analyses a model of non-linear exchange rate adjustment that extends the literature by allowing asymmetric responses to over- and under-valuations. Applying the model to Greece and Turkey, we find that adjustment is asymmetric and that exchange rates depend on the sign as well as the magnitude of deviations, being more responsive to over-valuations than undervaluations. Our findings support and extend the argument that non-linear models of exchange rate adjustment can help to overcome anomalies in exchange rate behaviour. They also suggest that exchange rate adjustment is non-linear in economies where fundamentals models work well.