CURRENCY SUBSTITUTION, U.S. MONEY DEMAND, AND INTERNATIONAL INTERDEPENDENCE

A number of writers have argued in recent years that massive international currency substitution has been a major cause of exchange rate volatility and monetary instability in the United States and other major countries. Such analysis is frequently coupled with recommendations for a return to pegged exchange rates. This paper critically examines the evidence presented for this currency substitution view. It argues that the weight of latest research suggests that direct international currency substitution has not been of major quantitative importance for the U.S. However, empirical evidence supports traditional views that international capital mobility can generate substantial short-run monetary interdependence even under flexible exchange rates. Thus, even though international currency substitution is of little importance to U.S. monetary conditions, a broader range of international considerations may be of considerable importance for the U.S. economy.     

Factor Intensity Reversal in a Three-Factor,Three-Commodity Model*

The extension of the notion of factor intensity reversal is extended to three dimensions and it becomes clear that a single phenomenon in two dimensions becomes two distinct phenomena in three. It is shown that one interpretation, the degeneration of A, the coefficient matrix, is the phenomenon which causes problems in trade theory, and this case is easily extended to higher dimensions. Another interpretation uses the Minkowski and Metzler definitions of intensities, and here it is shown that while ‘reversals’ are possible they cause no difficulties unless they are also associated with a degeneration of A. Thus the heart of ‘factor intensity reversal’, i.e. degeneration of A, is easily generalized.     

Diagnostic Screener for Compulsive Buying: Applications to the USA and South Korea

Compulsive behavior is an important topic for social scientists. One form of this behavior is compulsive buying. Using data sets from two countries, the USA and South Korea, the Diagnostic Screener for Compulsive Buying (DSCB) (Faber and O'Guinn 1992) is tested with specific emphasis on the scale's cross‐cultural transferability. We find evidence that the DSCB is unidimensional in the USA and bi‐dimensional in South Korea, suggesting a lack of transferability. Potential cultural reasons for the findings are discussed in detail as well as the implications for public policy and future research.     

FOREIGN EXCHANGE MARKET BID--ASK SPREADS AND THE MARKET PRICE OF SOCIAL UNREST

Time-series evidence yields estimates of the increase in thespread on the South African rand on days when riots, demonstrations,armed attacks, and related deaths occur in South Africa. Thecross-section evidence demonstrates how spreads vary across36 industrial and developing countries as spot rate volatilityand country risk vary. Both the changes in the spread over timefor particular countries and the changes in the spread acrossthe countries at a particular time appear to be significantlyrelated to countries' risk differences and exchange-rate volatility.     

HISTORY AND MEASUREMENT IN THE SERVICE SECTOR: A REVIEW

Economic Council of Canada, Employment in the Service Sector
Delaunay, Jean-Claude, and Jean Gadrey, Services in Economic Thought: Three Centuries of Debate
Griliches, Zvi (ed.), Output Measurement in the Service Sectors     

DOLLARIZATION IN DEVELOPING COUNTRIES: RATIONAL REMEDY OR DOMESTIC DILEMMA?

This paper reviews the policy implications of dollarization in developing economies. It outlines channels of U.S. currency access abroad and illustrates progressing stages of dollarization for various country examples. It analyzes the costs of large seigniorage losses facing domestic governments vis-a-vis the U.S. issuer. Finally, it provides three explanations for the observed inertia in dedollarization following domestic stabilization policies: (i) high transactions costs of switching monies, (ii) dollar revenues related to illegal commercial activities, and (iii) network externalities associated with foreign currency usage.