Exchange rate theories

Summary A four-period classification is used to categorise recent exchange-rate theories or models. In the very short period, only capital flows are relevant. In the short period, both capital flows and payments on the current account play a role. In the long period, the capital account and the current account are individually in equilibrium. In the very long period, purchasing power parity holds. Cash-in-advance models are dealt with separately. Many models that purport to explain exchange rates do in fact not provide for the exchange of currencies. No model stands up satisfactorily to econometric testing. Speculative bubbles, the peso problem and news play havoc with tests of the uncovered interest parity theorem, the core of the monetary models. This aside, the fundamental assumption of rational expectations itself is suspect. There does not seem to be such a thing as a true model.I am indebted to Dr. W.J.B. Smits and Professor J.W. Gunning for helpful discussions on a number of issues pertinent to this article.     

Introduction to a Symposium on Global Finance and the Agri‐food Sector: Risk and Regulation

This symposium introduction brings together two debates; the debate on global food prices and speculation, and the debate on so‐called global ‘land investment’ or ‘land grabbing’. Both debates are examining two sides of the same phenomenon – the growing role of private financial investors in the global agri‐food value chains and the myriad consequences of it. The symposium moves beyond the identification of finance as an exogenous factor to the trends in the sector. It examines real‐life incarnations of finance in the sector by looking at investment arrangements, including connections with the state, and its (regional) variations. The symposium addresses three main themes. First, it explores the interplay of the state and private finance. It shows that the effect of regulation is limited in the face of increasingly mobile and complex investment flows. Second, it addresses the shifts and transfigurations of risk in the agri‐food sector due to financialization. Third, the symposium discusses to what extent, and how, the origins and identity of farmland investors still matters within an increasingly globalized financial sector. The paper concludes by identifying some related areas for further research.     

The Asian Crisis, the IMF and Dr Mahathir

While in the literature concerning the Asian crisis extensive coverage has been given to the course of events in the countries implementing IMF-supported programmes, scant attention has been paid to other countries that also suffered from the crisis. Potential alternatives to the IMF way of handling the crisis are thus in danger of being neglected. The project on which this paper is based was funded by the Indo-Dutch Program on Alternatives in Development (IDPAD) in collaboration with the Indian Council of Social Science Research (ICSSR).     

COMMUNITY‐BASED PROVISION OF DEVELOPMENT SERVICES IN RURAL SOUTH AFRICA1

It is often contended that rural development works most effectively when beneficiary communities are active project participants, and not the passive recipients of assistance. This paper analyses participatory development through the lens of public goods theory. South Africa's Community Water Supply & Sanitation Programme is discussed as a case study. Conclusions from our game‐theoretic analysis are used to make suggestions for South African development policy.     

A Study of Consumer Behavior Using Laboratory Data

This paper reports the results of an experiment in which subjects had to buy real products in 5 different budget/price situations. Subjects were randomly drawn from the population of a medium-sized French city, and some of their socio-economic characteristics were recorded. We check the consistency of product choices with the Generalized Axiom of Revealed Preferences (GARP), and find that 29% of the subjects are GARP-inconsistent. This inconsistency rate is slightly lower than the ones found in comparable studies. A possible explanation for our lower rate of GARP violations might be that the subjects in our study were confronted with less budget/price situations. In looking for determinants of the GARP violations, we find that gender, the size of the household, the degree of switching between different products, and the times spent on performing experimental tasks have significant impacts on the probability of GARP-inconsistency.     

Is Transparency To No Avail?*

Transparent decision‐making processes are widely regarded as a prerequisite for the working of a representative democracy. It facilitates accountability, and citizens might suspect that decisions, if taken behind closed doors, do not promote their interests. Why else would there be the secrecy? We provide a model of committee decision‐making that explains the public's demand for transparency, and committee members' aversion to it. In line with case study evidence, we show how pressures to become transparent induce committee members to organize pre‐meetings away from the public eye. Transparency does not improve accountability, but it might improve the decision.     

Estimation of a hedonic price equation for Burgundy wine

A hedonic price equation and two jury grade equations are estimated for Burgundy wine. The approach is the same as in an earlier Bordeaux wine paper (Combris et al., 1997). The data come from an experimental study that is very similar to the study on Bordeaux wines. The results for the two wine-growing regions are compared and discussed.