A Framework for Assessing Global Imbalances1

Since the mid‐1990s and prior to the financial crisis external balances of systemically important economies widened significantly. This paper takes a long‐run perspective and reviews the main determinants of widening global imbalances. To this aim, we first provide a set of newly derived statistical measures: while large external imbalances are not new in economic history, their persistence, their concentration on one economy (the United States) and the specific role of emerging market economies make the present episode rather unique. Second, we argue that the observed pattern of imbalances can be mostly understood as a result of various structural changes in the global economy, which have allowed a widening trend of external positions. Three main features set the most recent period apart from past episodes of growing external imbalances: (i) the emergence of new players, in particular emerging market economies such as China and India, which are quickly catching up with the advanced economies; (ii) an unprecedented wave of financial globalisation, with more integrated global financial markets and increasing opportunities for international portfolio diversification, also characterised by considerable asymmetries in the level of market completeness across countries; and (iii) the favourable global macroeconomic and financial environment, with record high global growth rates in recent years, low financial market volatility and easy global financing conditions over a long period of time, running until the outburst of the financial crisis during the summer of 2007. These structural changes that have been supplemented by cyclical or policy‐induced factors ultimately facilitated the sudden, disorderly unwinding of global imbalances that is reflected in the current financial crisis.     

The constitutional future of the European Union

The formal distinction between a treaty and a constitution is much less important than the question of who is authorized to interpret and amend it. The judges of the European Court of Justice interpret the Treaty by simple majority, while unanimity of the member-states would be required to reverse these decisions. The European Union needs a Court whose judges are empanelled from, and selected by, the highest courts of the member-states. The Treaty on European Union violates three fundamental constitutional principles: (i) the principle of the separation of powers, (ii) the democratic principle, and (iii) the principle of subsidiarity.     

Tariff rate quotas and the economic impact of agricultural trade liberalization in the world trade organization

Since their implementation at the Uruguay Round, tariff rate quotas (TRQs) have become a widely used instrument of trade policy in agricultural trade. With almost 1,300 TRQs scheduled at the World Trade Organization, this paper will examine their economic effects more closely. First, the theoretical background of TRQs is examined. Then, a short overview of the Uruguay Round and their institutional background is given. We demonstrate that official statistics, which do not count TRQs as nontariff barriers, are at least highly misleading. Very often, their effects are the same as those of regular quotas, including redistributive effects. The prominent example of the European banana regime is used to illustrate all of these points.A first draft of this paper was presented at the International Atlantic Economic Conference, March 14–21, 2000, Munich, Germany. The results are part of the research project "The Influence of the Institutional Design on the Actual Impacts of Agricultural Trade Liberalization after GATT." Financial support by Volkswagen Stiftung is gratefully acknowledged.     

A Regime‐Switching Approach to Modeling Rental Prices of U.K. Real Estate Sectors

This article uses regime‐switching models of the threshold type to analyze the adjustment process of rental prices for three U.K. commercial real estate sectors over the period 1974–2008. The nonlinear models outperform their linear counterparts in in‐sample fit. Their out‐of‐sample forecasting ability is better whenever the corresponding linear models contain a significant amount of neglected nonlinearity. Regime switches are triggered when the growth rates of rental price exceed certain threshold levels. For the industrial and retail sectors such regime switches occur in situations of strong excess demand, for the office sector they occur when there is strong excess supply.     

Corporate Ethical Values and Altruism: The Mediating Role of Career Satisfaction

This study explores the ability of career satisfaction to mediate the relationship between corporate ethical values and altruism. Using a sample of individuals employed in a four-campus, regional health science center, it was determined that individual career satisfaction fully mediated the positive relationship between perceptions of corporate ethical values and self-reported altruism. The findings imply that companies dedicating attention to positive corporate ethical values can enhance employee attitudes and altruistic behaviors, especially when individuals experience a high degree of career satisfaction.     

International Cooperation Behind the Veil of Uncertainty – The Case of Transboundary Acidification

The complexities of international environmental problems are only poorly understood. Hence, decision makers have to negotiate about abatement measures even though they do not know the 'true' model of the ecological system and have only a rough idea about the costs and benefits of their action. It will be analysed to what extent this kind of 'model uncertainty' – where players do not only have incomplete information about the payoff functions of the other players, but also about their own payoff function – affects the prospects of international cooperation. Using a simple game-theoretic model, it is shown how countries can use the veil of uncertainty to hide their distributional interests. The arguments are based on a deviation from the common prior assumption, which seems particularly questionable in a setting comprising various countries with different cultural and scientific backgrounds. Finally the model will prove useful to quantitatively and qualitatively illustrate the central role of model uncertainty in the negotiations of the first Sulphur Protocol signed to combat transboundary acidification.     

The Case for International Competition Among Economic Policy Makers

How can governments and civil servants be controlled? Professor Roland Vaubel, of the University of Mannheim, explains how competition between nations improves economic policy.     

Real exchange-rate changes in the European community: A new approach to the determination of optimum currency areas

Deviations from relative purchasing power parity (real exchange-rate changes) are suggested as a comprehensive and operational criterion of the desirability of currency unification. Using consumer price indices, the criterion is applied to the European Community in 1959–1976 and in various subperiods. It is shown, inter alia, that the Community is probably a less desirable currency area than comparable existing currency unions like Germany, Italy and the U.S., that its failure to implement its 1971 plans for monetary union can hardly be attributed to unusually unfavourable external disturbances and that it is possible to identify the member countries which are the most suitable candidates for a pioneer venture in currency unification.