Exchange Rate Management and the External Debt Burden: The Case of the Philippines

The paper develops a simple macroeconomic model which is then estimated for the Philippines. Econometric evidence shows that Philippines monetary authorities have been reluctant to allow a real devaluation, because of a large public external debt and for the fear of fueling inflation. Simulations show that, while an overvalued exchange rate may bring some benefits in the form of lower inflation and improved budgetary performance, its current account costs may be significant. Brady-like deals can reduce fiscal imbalances, limit the sensitivity of fiscal aggregates to the exchange rate, and increase the benefits of a more aggressive exchange rate policy.     

The Impact of Trade Liberalization on Enterprises in Small Backward Economies: the Case of Chad and Gabon

This paper examines the impact of trade and fiscal reforms and of the 1994 devaluation of the CFA franc on enterprise development in Chad and Gabon. These reforms provide a natural experiment to assess the impact of trade liberalization in countries with a small and backward manufacturing sector. The empirical analysis is based on a new panel data base covering virtually the whole population of manufacturing firms in Chad and Gabon, and containing data spanning from the year before to two years after the reforms. The paper finds that although firms’ response to changing incentives was non‐negligible, with a shift of output from nontradable to tradable and an increase in productivity, the reform process was unable to generate a virtuous and self‐sustained circle, where export expansion brings a generalized productivity increase which in turn feeds on further export growth.     

Where do migrants go?

In this paper, we study migration decisions taken by risk-aversehouseholds. Aggregate data from the regions of Southern Italyare used to test whether risk is a significant determinant ofthe decision to migrate abroad or inside the country. This indeedappears to be the case for both foreign and domestic migrations,after controlling for unemployment and wage differentials andother plausible control variables. We interpret our resultsas evidence that, whereas financial markets are absent or malfunctioning,migration provides a shelter against uncertain income prospects     

Remittances and the Brain Drain: Do More Skilled Migrants Remit More?

In most destination countries, immigration policies are tiltedmore and more in favor of skilled individuals. Whether thisshift hurts economic prospects in sending countries, as arguedby the traditional brain drain literature, is somewhat controversial.The most recent literature focuses on the link between skilledoutmigration and educational achievements in the home country.This article emphasizes a different channel. It considers theargument that skilled migrants raise economic welfare at homeby sending a relatively larger flow of remittances. While skilledmigrants typically earn more, and so might be expected to remitmore, they are also likely to spend more time abroad and toreunite with their close family in the host country. These secondtwo factors should be associated with a smaller propensity toremit. Thus, the sign of the impact of the brain drain on totalremittances is an empirical question. A simple model has beendeveloped showing that skilled migrants may indeed have a lowerpropensity to remit from a given flow of earnings. An empiricalequation of remittances is estimated as a measure of the braindrain in developing countries using the Docquier and Marfouk (2004)data set. Evidence is found that the brain drain is associatedwith a smaller propensity to remit.     

Cumulative processes of de-industrialisation in an open region: The case of Southern Italy, 1951–1973

In a dual economy an improvement in the terms of trade will not lead necessarily to higher levels of real income and welfare. Moreover, if economies of scale prevail in the foreign supply of the importable (industrial) good, it is shown that cumulative processes of de-industrialisation will occur. The case where goods are traded at non-zero transportation costs and where increasing returns prevail in the transportation and/or distribution sector itself is specifically analysed. The policy implications and the empirical relevance of these results are analysed with reference to the Southern Italian development from 1951 to 1973.     

Book Reviews

Books reviewed in this article:
Richard Friberg, Exchange Rates and the Firm: Strategies to Manage Exposure and the Impact of EMU
Stephen Cecchetti, Hans Genberg, John Lipsky, and Sunil Wadhwani, Asset Prices and Central Bank Policy
Michael J. Greenwood and John M. McDowell, Legal U.S. Immigration: Influences on Gender, Age, and Skill Composition
Pontus Braunerhjelm, Riccardo Faini, Victor Norman, Frances Ruane, and Paul Seabright, Integration and the Regions of Europe: How the Right Policies Can Prevent Polarization