Industrialization bottlenecks and the development of industrial technology

Policies other than those designated as dealing primarily with technology have important consequences for the technological development of industry. This is especially true in a region such as Latin America, where most technological development accompanies ongoing investment activity, and is shaped to a considerable extent by market needs and evolving problems related to production and the supply of inputs. Problems become bottlenecks when they interfere with a smoothly functioning process of industrialization and are difficult and costly to overcome; it is essential to understand more about such bottlenecks, the way in which they are perceived and the manner in which they are most successfully dealt with. This paper lists the major categories of bottlenecks and discusses the special significance which four of them have for the technological development of industry. The four considered are constraints in importing production inputs, financing difficulties, human resources limitations, and unclear economic signals. It is suggested, moreover, that certain resolutions of these bottlenecks in the short run lead to serious problems in the long run, and may interfere with a desirable course of technological development.     

Savings bonds,retractable bonds and callable bonds

Savings bonds, retractable bonds and callable bonds are each equivalent to a straight bond with an option. Neglecting default risk the value of these contingent claims depends upon the riskless interest rate. This paper employs the option pricing framework to value these bonds, under the assumptions that the interest rate follows a Gauss-Wiener process and that the pure expectations hypothesis holds.     

Was Expansionary Monetary Policy Feasible during the Great Contraction? An Examination of the Gold Standard Constraint

The recent consensus view that the gold standard was the leading cause of the worldwide Great Depression 1929-1933 stems from the two propositions: (1) Under the gold standard, deflationary shocks were transmitted between countries and, (2) for most countries, continued adherence to gold prevented monetary authorities from offsetting banking panics and blocked their recoveries. In this article we contend that the second proposition applies only to small open economies with limited gold reserves. This was not the case for the United States, the largest country in the world, holding massive gold reserves. The United States was not constrained from using expansionary policy to offset banking panics, deflation, and declining economic activity. Simulations, based on a model of a large open economy, indicate that expansionary open market operations by the Federal Reserve at two critical junctures (October 1930 to February 1931; September 1931 through January 1932) would have been successful in averting the banking panics that occurred, without endangering convertibility. Indeed had expansionary open market purchases been conducted in 1930, the contraction would not have led to the international crises that followed.     

Patent protection through discriminatory exclusion of imports

Section 337 of the U.S. Tariff Act empowers the ITC to order the exclusion of imported products found to infringe a U.S. intellectual property right. The EC and other countries have charged that section 337 and its procedures create discrimination, by offering stronger protection in the U.S. market against infringement by foreign products than by domestic. The EC's policy towards gray market imports has a similar discriminatory flavor. This paper analyzes the economic costs to the home country implicit in such discriminatory protection of intellectual property. Excluding infringing imports when their true costs are lower results in the domestic market being served by higher cost production. Moreover, tolerating infringement by domestic products dilutes the gains accruing to a patent holder when imports are excluded. The upshot is that for plausible assumptions about cost differences internationally and about the scope for domestic infringement, discriminatory exclusion of imports can be an expensive way to protect intellectual property. Other mechanisms can reward innovators in a more efficient manner.Associate Professor of Economics, Georgetown University, Washington DC 20057. For helpful discussions and comments I wish to thank John Barton, Jonathan Eaton, Maxim Engers, David Malueg, and Martin Richardson.     

Risks to the long-term stability of the euro

There are grounds for immediate and long-term concerns with respect to the prospects for the stability of the euro's purchasing power. The immediate concerns arise from the pressures on the ECB to be more accommodative and the drive to weaken the Stability and Growth Pact. The long-term concerns arise from the spending obligations the member governments have assumed to provide pensions and health care to their aging populations for the next half-century, and the imminent enlargement of the EU to include ten states that are less economically and institutionally advanced than the present group of member states. The outlook is for greater spending by governments than their projected resources unless forces not now visible will strengthen the resolve of political leaders to serve the cause of a sound euro.Presidential address at the International Atlantic Economic Conference, Quebec City, Canada on Saturday, October 18, 2003.     

Electricity Prices and Power Derivatives: Evidence from the Nordic Power Exchange

This paper examines the importance of the regular pattern in the behavior of electricity prices, and its implications for the purposes of derivative pricing. We analyze the Nordic Power Exchange's spot, futures, and forward prices. We conclude that the seasonal systematic pattern throughout the year, in particular, is of crucial importance in explaining the shape of the futures/forward curve. Moreover, in the context of the oneand two factor models analyzed in this paper, a simple sinusoidal functionis adequate in order capture the seasonal pattern of the features and forwardcurve directly implied by the seasonal behavior of spot electricity prices.     

Valuing American options by simulation: a simple least-squares approach

This article presents a simple yet powerful new approach forapproximating the value of American options by simulation. Thekey to this approach is the use of least squares to estimatethe conditional expected payoff to the optionholder from continuation.This makes this approach readily applicable in path-dependentand multifactor situations where traditional finite differencetechniques cannot be used. We illustrate this technique withseveral realistic examples including valuing an option whenthe underlying asset follows a jump-diffusion process and valuingan American swaption in a 20-factor string model of the termstructure.     

Pricing Residential Amenities: The Value of a View

This study provides estimates of the value of the view amenity in single-family residential real estate markets. A focus on Bellingham, Washington, a city with a variety of views, including ocean, lake, and mountain, allows for differentiation of the view amenity by both type and quality. Results from a hedonic model estimated for several recent years suggest that depending on the particular view, willingness to pay for this amenity is quite high. The highest-quality ocean views are found to increase the market price of an otherwise comparable home by almost 60%; the lowest-quality ocean views are found to add about 8%. For ocean views of all quality levels, the value of a view is found to vary inversely with distance from the water.     

How Functional is the Eurozone? An Index of European Economic Integration Through the Single Currency

This article is a step towards empirically assessing how close the Eurozone is to becoming an ‘optimal currency area’, as originally defined by Mundell ( 1961 ). For this purpose we have compiled ten indicators, organised them in four partial indices, and summarised them in an overall indicator of ‘optimality’. The resulting picture is mixed, with zone optimality not increasing when circumstances were favourable but the trend towards integration returning after the 2008–14 crisis. The suggestion is that disintegration during the crisis, rather than being evidence of failure of the Eurozone when the going was tough, showed a self‐healing mechanism at work. However, our measurements and indices show that optimality is much further away than it was in 1999, when the euro was launched.