COMPARATIVE ADVANTAGE: ASSESSING APPROPRIATE MEASUREMENT TECHNIQUES

This note considers the impact of recent generalizations of trade theory upon indices of'revealed'comparative advantage. In particular, defining economic activities in terms of net output meets some of the theoretical objections to such measures. For two types of measure — trade/production and net export indices — such a basis for calculation has only slight consequences and, therefore, suggests such objections to not be significant in practice. For a third type of measure — export share based indices — these theoretical objections have more force in practice.     

PRACTITIONERS CORNER: Tests for Cointegration in Models with Regime and Trend Shifts

ABSTRACT Recently Gregory and Hansen (1996) proposed a number of residual-based tests for cointegration in models with the possibility of a structural break. They considered three models: (i) level shift; (ii) level shift with trend; and (iii) regime shift (both level shift and slope coefficients can change). We introduce a more general model that permits a trend shift as well as a regime shift and we provide the critical values appropriate for testing this hypothesis.     

Do Crises Induce Reform? Simple Empirical Tests of Conventional Wisdom

We find evidence for the crisis-induces-reform hypothesis at extreme values of the inflation rate and the black market premium. Episodes of extremely high inflation or black market premiums are followed by periods of better performance than episodes of moderately high inflation or black market premiums. We fail to find similar evidence of the crisis hypothesis when crisis is measured as a high current account deficit, a high budget deficit, or a negative per capita growth rate. The pattern of foreign aid disbursements may help explain the results. Foreign aid is reduced at extreme values of inflation or the black market premium, while it is actually increased for more extreme values of the current account deficit and the budget deficit.