Choosing sides in the trilemma: international financial cycles and structural change in developing economies

ABSTRACT

This paper analyzes the impact of international financial cycles on structural change in developing economies. It is argued that the impact of these cycles depends on the specific combination of macroeconomic and industrial policies adopted by the developing economy. The cases of Brazil and Argentina are contrasted with those of Korea and China. In the Asian economies, macroeconomic policy has been a complementary tool along with industrial policy to foster the diversification of production and capabilities. Inversely, in the case of the Latin American countries, long periods of real exchange rate (RER) appreciation, combined with the weaknesses (or absence) of industrial policies, contributed to the loss of capabilities and lagging behind.     

Supra-National Money and the Euro Crisis: Lessons from Karl Polanyi

The paper seeks to examine some of the key features of Karl Polanyi’s ideas explaining the collapse of the pre-Great Depression unregulated market system by using his broad framework of analysis, as developed in The Great Transformation and published over 70 years ago, to explain the present Eurozone crisis. Emphasis is placed on the two key institutions of the pre-Depression era, namely haute finance and the gold standard, as well as his heterodox views on the nature and origin of money to shed light on the evolving crisis within the Eurozone. On the basis of Polanyi’s insights, the paper concludes that the cause of the latter crisis is similar and it lies primarily in the adoption of stateless or supra-national money that is even more restrictive on the behaviour of national authorities than the conditions imposed under the gold standard. The current situation of quasi-permanent austerity in the Eurozone is the inevitable consequence of its monetary architecture, and it will remain a long-term feature of Europe, unless significant institutional changes are put in place to bridge the gap between money and the state.     

Labour‐market institutions and their impact on trade partners: A quantitative analysis

Recent theoretical literature studies how labour market reforms in one country can affect labour market outcomes in other countries, thereby rationalizing widely held policy beliefs and empirical evidence. But what is the quantitative relevance of such spillover effects? This paper combines two recent workhorse models: the canonical search‐and‐matching framework and the heterogeneous firms international trade model. Qualitatively, the framework confirms that labour market reforms in one country benefit its trading partners, replicating the stylized facts. However, when wages are bargained flexibly, the model quantitatively underestimates the correlation of structural unemployment rates across countries. Introducing some degree of real wage rigidity remedies this problem.     

Economic growth as a function of human capital,internet and work

The World Bank has suggested the need to enhance Information and Communication Technology skills in all sectors because a 10% increase in internet connectivity was found to boost GDP growth by 1.38%. Simultaneously, the OECD argued that high internet access rates generate a 2% increase in GDP. Because the internet positively affects economic growth, we investigated the relationship between an economically active population, human capital and technology to evaluate these effects in Mexico. A data series from 1991 to 2010 was analysed in three stages according to the least-squares method. A Cobb–Douglas function under the Solow model was considered. Technology and internet access were found to positively affect top-level students and graduate students and thus contribute to the global innovation index.     

Restrictions on Foreign Investments and the Relocation of Firms

We analyse why the Chinese government sets restrictions on foreign direct investment (FDI). We focus our analysis on the percentage of shares in relocated firms that the government allows to be foreign‐owned. The government's decision on this percentage depends on the entry cost, the number of firms that relocate and the weight of the consumer surplus in the objective function of the government. We show that by its choice of this percentage, the Chinese government may restrict or encourage FDI to its country. We also find that if the government may subsidise the fixed entry cost, it provides a subsidy only when the producer surplus has a greater weight than the consumer surplus in weighted welfare. In that case, the subsidy encourages relocation by both firms and permits the government to allow a lower percentage of shares to be foreign‐owned in relocated firms.     

Assessing the impact of crime on the economic performance: the case of central america

Crime is obviously a menace to economic growth and progress, but to acutely understand the enormity of its impact on economic performance for effective policy action, requires a credible means of measurement. Given the crime notoriety of the most of Central America and the struggling state of their economies, this article attempts to discern from econometric evaluation and analyses, the calculable economic impact of crime on the region’s economic progress. From analyses of results, we find the model to be credible and useful following its provision of a much more accurate degree to which crime affects economic performance in Central America, which we find critical to guide policy measures.     

Inflation variability in Latin America: A note on the time series evidence

Time series evidence is used to examine the relationship between the level of inflation and its variability in Latin American countries.     

Influence of institutional environment on entrepreneurial intention: a comparative study of two countries university students

Institutional environment influences the perceptions of desirability and feasibility, society’s social and cultural environment, such as beliefs, values and attitudes, conditions behaviour and decisions made by individuals. This research evaluates the influence of institutional environment on entrepreneurial intention using a comparative analysis of different attitudes among university students in two countries: Portugal and Spain. In particular, this study aims to examine the perceptions of desirability, feasibility and intention toward the creation of one’s own business and how that variables influence the entrepreneurial intention as compared these two different institutional contexts. Results revealed difference among attitudes toward entrepreneurship in both countries. With respect to the perception of feasibility, the majority of students in Extremadura (Spain) consider that it is easier to create a business in nowadays than it was several decades ago. However, from the students of Beira Interior (Portugal) consider that it is more difficult. Furthermore, in Extremadura, the entrepreneurial intention is higher than in Beira Interior.     

Consumer durables and the marginal propensity to consume out of permanent income shocks

This paper derives and estimates a model in which the utility of durable and non-durable consumption is allowed to be non-separable and individuals face a convex adjustment cost for the purchase of a new durable good. Panel data on subjective expectations allow us to identify income shocks and estimate the marginal propensity to consume out of permanent income shocks.