Why clashes between internal and external stability goals end in currency crises, 1797–1994

We argue that recent currency crises reflect clashes between fundamentals and pegged exchange rates, just as did crises in the past. We reject the view that crises reflect self-fulfilling prophecies that are not closely related to measured fundamentals. Doubts about the timing of a market attack on a currency are less important than the fact that it is bound to happen if a government's policies are inconsistent with pegged exchange rates. We base these conclusions on a review of currency crises in the historical record under metallic monetary regimes and of crises post-World War II under Bretton Woods, and since, in European and Latin American pegged exchange rate regimes.     

Assessing individual differences in psychophysical functions

Individual differences in psychophysical data are examined in an olfactory experiment using a group of sixteen children (9 year olds) and three different techniques: magnitude estimation (ME), reglets or sticks (RE) and finger span (FS). From the responses given in the three techniques Steven's functions were calculated. Group and individual fits to the power law are analyzed. Comparisons of all individual curves were also done and consistency of the subjects responses across techniques was examined. Results show that: (1) while group data fit to the power law, individual data, in general, do not; (2) individual differences are found in both slopes and intercepts and (3) subjects are consistent in their judgments across techniques. These results might be interpreted in a sensory and cognitive context. Further research is needed to identify the specific contribution of sensory and cognitive sources to the individual differences in the psychophysical function.     

Factors that determine the cost-effectiveness ranking of second-best instruments for environmental regulation

This paper develops a conceptual model to analyze how specific factors affect the compliance costs of three suboptimal policy instruments, when compared to the optimal ambient permit system (APS) benchmark. The model considers a non-uniformly mixed pollutant and explicitly incorporates the following factors: number of polluting sources; size, in terms of emissions, of each process; marginal abatement costs for each process; effluent concentrations; the transfer coefficient that relates emissions to environmental quality at the receptor; and the desired environmental quality target. APS is compared to a suboptimal emission permit system (EPS), and two Command and Control (CAC) policies—equal percentage reduction (PER) and a uniform effluent concentration standard (STD). The results show the importance of the different factors and their interactions in determining each policy instrument’s cost-effectiveness ranking. Surprisingly, EPS performs well within the usual values of these factors and in specific cases STD and PER also perform similarly to APS.      

Classical economics and the Great Irish Famine:A study in limits

The Great Irish Famine resulted from two massive failures: the blight that destroyed the potato crop and the non-interventionism of the English government. The first failure, which also occurred in other European countries, was devastating for the Irish who depended on the potato as their main source of nourishment. The second failure was a human failure because English government policy was instructed by classical economics to let the market clear the surplus population from the land and was reinforced by the anti-Irish racism common in England at the time, even among classical economists, notably Nassau Senior and J.S. Mill. For most of the 19th century, the English answer was to ignore the hate and crush the crime which [the land system] produced. In the forty years before 1870 forty-two Coercion Acts were passed. During the same period there was not a single statute to protect the Irish peasant from eviction and rack-renting.—Winston Churchill, The Great Democracies,p. 343. It is commonplace in economic research to assume that the investigator has removed all traces of personal values from his/her work. As Becker (1961, p. 10) implies, that could be a serious error. For that reason, let me state at the outset that I am a first-generation Irish-American, holding dual citizenship in the United States and the Republic of Ireland. My mother and father both were born and raised in County Mayo—the poorest county in western Ireland, where the toll in human lives lost during the Great Famine was staggering. I do not know how many of my own Irish ancestors suffered and died during the Great Famine. What I do know and acknowledge is that my selection of this topic clearly is related to that family background which also very likely influenced the way I have interpreted the evidence presented herein. I concede that someone else sifting through the evidence might come to different conclusions, but I know of no other way to proceed. Supportive comments by Hans Jensen and Peter Danner on earlier drafts are gratefully acknowledged, as are the suggestions made by the editor and an anonymous referee. Any remaining errors are entirely mine.     

Short‐term monitoring of fiscal policy discipline

Under the Maastricht Treaty and the Stability and Growth Pact (SGP), European Union (EU) Member States commit themselves to avoid excessive deficits over 3% of GDP and to pursue the medium‐term objective of budgetary positions close to balance or in surplus. The SGP also provides regulation for the surveillance of budgetary positions. An analysis of tools for the surveillance of budgetary positions is the focus of this paper. In particular, it addresses two open issues in the empirical public finance literature which are crucial for monitoring fiscal policy discipline in the EU. First, the estimation of the structural component of the fiscal balance ratio. Second, the computation, when only annual fiscal data are available, of quarterly budget balance ratios, using relevant information from quarterly measured macroeconomic series. An econometric model that addresses both issues is presented and estimated. Additionally, this modelling framework allows us to answer questions such as: what is the safety margin that will prevent a particular country from reaching, with certain probability, a budget deficit that breaches the 3% upper bound? Copyright © 2004 John Wiley & Sons, Ltd.     

The lender of last resort and the federal safety net

Under the aegis to the New Deal, the government established a safety net consisting of deposit insurance, a lender of last resort, and regulation. In the postwar period when the inflation rate was low, the economy stable, and the bank failure rate low, the safety net appeared to be an effective instrument to deliver financial stability. In the unstable economy since the 1970s, the functioning of each element of the safety net has been questioned. A reconsideration of the role assigned to each constituent is timely. I begin with a review that brings up to date since 1933, first, the role of regulation, second, deposit insurance, and third, the lender of last resort. Finally, I discuss how each of these might be reshaped in light of the changes since the 1970s.This paper was prepared for a conference in memory of Michael J. Hamburger at the Graduate School of Business Administration, New York University, March 12, 1987.     

Incorporating nutrients into meat demand analysis using household budgets data

The objective of this article is to analyze the Spanish demand for meat, taking into account the consumer's concern about the relationship between food diet and health. This concern is forcing food demand analysts to assume that consumer utility is a function of nutrients instead of simply the food products themselves. Nevertheless, these utility function arguments are not produced in the marketplace but rather at home. As a consequence, in this article household production theory is followed in order to analyze Spanish demand for meat using the Quarterly National Expenditure Survey for 1999. Demands for several meat products (the input in the model) are derived from the translog cost function. Censored regression models are used in the estimation process, since many zero responses are reported. Five broad categories, eight nutrients, and the most relevant socioeconomic variables are considered. Finally, a set of elasticities is calculated with respect to all the variables included in the analysis.     

Consumer behavior research in hospitality and tourism journals

In this review, I identify key trends and “camps” in consumer behavior research in the field of hospitality and tourism research based on a thorough analysis of articles published in 2003. I also highlight some challenges faced by our discipline in terms of theory development and methodological issues.