The regional consequences of the Japanese second wave: A case study

This paper examines the Japanese “second wave” sector in the local economy. Following an examination of the development of the second wave Japanese-owned supplier sector in the UK, the paper assesses the role of this sector in the local economy, and questions the policy rationale of attracting this particular type of inward investment.     

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The Balassa-Samuelson Model: an Overview*

This paper introduces a special issue marking the thirtieth anniversary of the publication of two classic papers in international economics, Balassa (1964) and Samuelson (1964). We provide a brief analytical treatment of the basic model and an overview of the contributions in this special issue. the special issue includes novel empirical and theoretical approaches related to the Balassa-Samuelson model. Theoretical models include dynamic two-sector growth models, two-country general-equilibrium models, and openeconomy models with imperfectly competitive nontraded-goods sectors. Several papers exploit new sources of data or datasets constructed in new ways from traditional sources. “Under the skin of any international economist lies a deep-seated belief in some variant of the PPP theory of exchange rates.” (Rudiger Dornbusch and Paul Krugman, 1976, p. 540)     

Intervention in the mark/dollar market: the authorities' reaction function

This paper investigates the intervention behavior of the Deutsche Bundesbank in the dollar/DM market over the period 1974 to 1981. An intervention reaction model is developed which stresses the conditioning role of perceived exchange-rate uncertainty. The most important findings from non-linear estimates are: (i) an increase in perceived exchange rate risk shifts the Bundesbank's trade-off between money and exchange-rate control in favor of the former aim, probably due to risk aversion of the managers of the foreign department; (ii) the Bank tries to counter exchange speculation by compressing the expected risk premium; and (iii) the Bank does not completely sterilize.     

Abstracts

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I. Allgemeine wirstchaftslehre

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Citizen participation through computer conferencing

As American society grows more diverse and the issues that must be decided grow more complex, the need for new forums and better forms for public debate increases. Is computer conferencing likely to meet this need because of its potential for facilitating public participation in government? To shed light on this question, we constructed, ran, and observed a computer conference on recombinant DNA among four participants with no previous experience in using computers and no scientific training. Results indicate that not only was this topic successfully discussed by lay people in this way, but that the conferencing mode of discussion was preferred by certain types of people. Our experience also gave us insights that may improve management of computer conferences for inexperienced users.     

A structural model of price and exchange rate dynamics in a small open economy

Conclusions A major result following from the analysis of ourstructural model of inflation under flexible exchange rates is that there is no such thing asstructural inflation in the long run. Long-run inflation rather becomes a purely monetary phenomenon if exchange rates are flexible and if on an international level functioning capital markets are postulated. While, in the light of the assumptions made in Part III, this finding is not nearly as paradoxical as it may appear at first sight, it can hardly be overemphasized considering the ongoing theoretical discussion and the empirical research on the Scandinavian approach to inflation and recalling that the Scandinavian model is basically intended to picture equilibrium dynamics.The results concerning equilibrium price and exchange rate dynamics also apply to the equilibriumlevels of prices and the exchange rate, i. e., the equilibrium price level depends exclusively on monetary factors while the equilibrium exchange rate is determined by a purchasing power parity element and the structural productivity gap component.Turning to the results of our analysis of disequilibrium dynamics, the overall picture does not change very much. Here the qualitative pattern of adjustment of both prices and the exchange rate is again completely independent of structural variables, but is exclusively determined by four adjustment coefficients. However, the particular quantitative values assumed by prices and the exchange rate during the adjustment process do indeed reflect the impact of the productivity gap.No conclusions can be derived from our model on the amount of time it takes to return to the neighbourhood of equilibrium once the economy has been subjected to some kind of external shock. A casual examination of post-1973 developments and especially the Swiss experience suggest, however, that in the case of a disturbance as, e. g., in the form of a monetary contraction (relative to the rest of the world), the economy may take so long to return to the neighbourhood of long-run equilibrium that the negative real consequences of the overvaluation of the domestic currency during the adjustment process provide a momentous rationale for short-run stabilization interventions in the foreign exchange market.We should like to thank Peter Bernholz and an anonymous referee for helpful comments on a previous version of this paper.     

Policy Regimes and Performance of the Agricultural Sector in Latin America and the Caribbean During the Last Three Decades

In a review of the policy regimes and agricultural output performance in Latin America and the Caribbean (LAC) during the past three decades, the linear sequence of pre-reform, crisis and reform, and post-reform recovery is qualified, focusing on a sample of nine LAC countries. The sector did quite well during the ISI policy regime, criticized for its price discrimination, and does not show the assumed characteristics of the 'lost decade' during most of the 1980s, as even agricultural exports (in constant terms) remained important, only to suffer from drops in international prices. Residually treated in the macro-oriented reforms, it has never regained the growth rates under the SAP policy regime, while it was expected that it would benefit more than others. These unorthodox conclusions are founded on a detailed investigation into agricultural output and export performance, correlating it with a reform index (on a country basis).