International Financial Liberalization and Economic Growth

This paper pulls together existing theory and evidence to assess whether international financial liberalization, by improving the functioning of domestic financial markets and banks, accelerates economic growth. The analysis suggests that the answer is "yes." First, liberalizing restrictions on international portfolio flows tends to enhance stock market liquidity. n turn, enhanced stock market liquidity accelerates economic growth primarily by boosting productivity growth. Second, allowing greater foreign bank presence tends to enhance the efficiency of the domestic banking system. In turn, better-developed banks spur economic growth primarily by accelerating productivity growth. Thus, international financial integration can promote economic development by encouraging improvements in the domestic financial system.     

The stern Stewart PERFORMANCE 1000

The big news in Stern Stewart's annual performance rankings is the unseating of Coca-Cola, the top-ranking company for the past three years, by General Electric—and Microsoft's dramatic rise into third place. Besides presenting the full rankings (the top 100 of which were published by Fortune this fall), this article complements the preceding roundtable by describing the inroads of EVA into Europe and Latin America.     

Communitarian Capitalism: A ‘Market’ Model for China?

As capitalist regimes of the global triad — American-style ‘individualistic’, European ‘statist’, and Japanese-style ‘communitarian’ — contend for dominance in the emerging world economic order, China is emerging as a critical battleground. This study examines the utility of the communitarian model for China's transition to market socialism. The first section presents salient features of Japanese-style capitalism; the second evaluates the model in terms of political-economic and socio-cultural institutional environments. The conclusion sets out implications for both Chinese leaders and foreign firms.     

The relation between forward prices and futures prices

This paper consolidates the results of some recent work on the relation between forward prices and futures prices. It develops a number of propositions characterizing the two prices. These propositions contain several testable implications about the difference between forward and futures prices. Many of the propositions show that equilibrium forward and futures prices are equal to the values of particular assets, even though they are not in themselves asset prices. The paper then illustrates these results in the context of two valuation models and discusses the effects of taxes and other institutional factors.     

The taming of the Shrew(ish snake)?

An article in the last issue of INTERECONOMICS discussed problems of the monetary integration in Europe as they may arise under the new European Monetary System¹. It dealt more particularly with the exchange rate problems whereas the following contribution is concerned with the intervention and credit mechanism.     

Comments on qualitative results for investment proportions

Some mean/variance efficient portfolios will have positive investments in all individual assets when covariances satisfy the conditions given here. These conditions are more useful empirically than qualitative results that depend on the inverse covariance matrix. The prospect appears dim for general and useful qualitative results.     

Bayesian estimation of a random coefficient model

This paper carries out a Bayesian analysis of the Hildreth-Houck (1968) random coefficient model and applies it to some cross-section production function data. Posterior distributions for mean coefficients, actual coefficients, variances and variance ratios are derived. The variance ratio posteriors are largely uninformative but they do lead to relatively informative densities on the variances, and the problem of negative variance estimates, obtained with previous techniques, is overcome. Posterior densities for the mean coefficients are not extremely sensitive to the variance ratios.