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The bivariate relationship between real exchange rates and the real long-term interest rate differential has been investigated in a number of recent studies. By exchange-rate-equation standards, this specification does a relatively good job of tracking the historical movements in the dollar-Deutschemark and the dollar-yen bilateral exchange rates, and the dollar effective exchange rate; but does a poor job for the dollar-sterling rate. This paper extends the analysis to 18 OECD countries, in bilateral as well as effective terms. Results from earlier studies are confirmed, but in general the estimation results are sufficiently mixed to suggest that the absence of any risk premia variables may be an important omission ...
Orthodox trade theory rests on a number of unrealistic assumptions which include, among others, constant returns to scale in production and perfect competition in product and factor markets. This has led many commentators to express strong skepticism about the policy conclusions flowing from the orthodox framework. In response to these concerns, a rapidly-growing literature has developed over the past decade which incorporates more realistic features of the trading system such as imperfect competition, increasing returns to scale and product differentiation.
This paper presents a review of the empirical research on the "new trade" theories. Section II outlines briefly the theoretical framework for the empirical research. The results from a series of partial and general equilibrium studies are surveyed in Section III. The final section suggests some directions for future work in this area ...
This paper uses the OECD's economic model, INTERLINK, to examine the consequences of eliminating the U.S. federal government deficit. Such action could lead to either lower real interest rates, lower inflation rates or a smaller current account deficit, depending on the stance of monetary policy. The elimination of the U.S. Federal deficit over the medium term could significantly lower the U.S. inflation rate and improve the current account deficit, if nominal interest rates were held constant in the face of falling inflation rates. In the absence of a reduction in the fiscal deficit, a significant increase in interest rates would be necessary to achieve the same reduction in the inflation rate. If, however, policy tightening is not necessary to contain inflation, a reduction in the fiscal deficit might be accompanied by a fall in nominal and real interest rates. In this case, a reduction in the fiscal deficit would not necessarily result in an improvement in the current account ...
This document presents an exploratory contribution to the understanding of the political economy of poverty alleviation. Usually, governmental decisions to apply macroeconomic measures that minimise the negative effects of adjustment on the poor, or to implement programmes specifically aimed at reducing poverty, assume that the majority of the population will support them. While there are many studies on the rationality of public choices, there are very few on the political conditions required for the implementation of anti-poverty programmes. This paper presents an indicator for assessing the political feasibility of such programmes. To take into account the influence weights of each social group, the authors have retained seven elements. Among these are: exercise of economic power, group size and the expectations of gains from the policy.
Taking as an example alternative policies in India and Ecuador, the authors show that coalitions comprising a majority of non-poor will ...
Between 1955 and 1985 world maize production almost doubled. With little new land available, future growth in world production must come from higher yields and, hence, from new technologies. This paper describes some of the emerging maize biotechnologies, outlines progress made in R & D and discusses their possible impact on maize production.
At present, the new biotechnologies are directed more towards quality enhancement (modification of starch, protein or oil content) and towards endowing plants with particular properties (herbicide tolerance, resistance to pests or adverse weather conditions) than towards increasing yields per se. They offer hope for reduced environmental stress through reduced levels of application of agricultural chemicals. Like earlier technologies, however, most new biotechnologies will be incorporated in seeds and will therefore complement and continue to depend on, traditional plant breeding.
A new maize research and technology development system is ...
In analysing Argentina's variable growth record over the period 1913 to 1984, the study develops a comprehensive framework which disaggregates the economy into three sectors: agriculture, nonagriculture and government. The aim is to examine the relative performance of these sectors in the context of macro-economic policies.
The study focuses on the role of the real exchange rate. This is related not only to taxation and trade, as is often the case, but also to macro-economic policies. The differential impact of changes in the real exchange rate on the different sectors is examined, according to their degree of tradability. This analysis is then developed to show how sectoral prices are affected by macro and trade policies, as well as world terms of trade and how this affects sectoral output and hence, resource allocation and productivity.
The analysis is presented in terms of a single dynamic model which simulates the growth of the Argentine economy over the entire 1913-1984 period ...
The paper examines the desirability of exchange rate management in a commodity-exporting country, in which the terms of trade are driven by the world commodity price cycle. When the authorities are assumed to pursue an inflation objective, the usefulness of managing the rate depends on the relative importance of monetary versus terms of trade shocks. Empirical evidence suggests that floating rate regimes will normally be preferred for countries like Australia and New Zealand, although circumstances can be envisaged in which either leaning-against-the-wind or leaning-with-the-wind policies are required. A review of experience since the Korean War boom suggests that attempts to fix the exchange rate in the face of the commodity cycle are likely to be associated with inflation problems, while labour market asymmetries can lead to resource misallocation and to pressures for the protection of the non-commodity traded goods sector ...
Concerns over the pace, scope and causes of environmental degradation have led to a renewed interest in the way environmental and economic policies interact. This paper first reviews the main causes for excessive use of environmental resources in a market economy, and how governments may conduct policies to counter environmental degradation. The focus of the paper then shifts towards the implications of economic growth on overall wealth and the possibilities for preserving or expanding the basis of this wealth, particularly in relation to the notion of sustainable development. Finally, it examines policy options for limiting global environmental problems such as climate change, in particular as regards the trade-offs involved in curbing the use of fossil fuels ...
The purpose of this paper is to set out a conceptual framework for policies to promote the diffusion of microelectronics in the context of developing countries. The author bases her discussion on the experience of Venezuela, a medium-sized Latin American economy which is currently trying to overcome an extreme dependence on oil export revenues and eliminate the over-protection of its industry in an effort to upgrade its international competitiveness. Current industrialisation policies are centred on three priority sectors: the modernisation of the existing petro-chemical complex; an expansion and upgrading of the mining and metallurgical sector (steel and aluminium); and, finally, aggressive export strategies for a select group of agro-industries, based on tropical agriculture and fisheries. Targeting the requirements of these three priority sectors should guide the formulation and implementation of a useroriented microelectronics strategy.
The electronics industry needs to be ...
Taxes levied on the carbon content of fuels (carbon taxes) are being considered in many OECD countries as a possible policy instrument to reduce carbon dioxide emissions. This paper first reviews the policy response in Member countries to the threat of global warming. It then discusses the link between carbon emission intensities and current energy prices, touching also on the relative price effects of current energy policies and the implicit carbon taxes reflected in present energy taxation for different fuels. Finally, the likely size of carbon taxes and associated tax revenue is illustrated by simulations of OECD's GREEN model for equiproportionate emission cuts and a global permit trading system ...
Equal pay is no longer discussed simply in relation to equal work. Equal pay for work of equal value has, in some countries, become a critical objective of policies against discrimination in employment. This report describes the degree to which the concept of work of equal value has been incorporated into equal pay legislation and collective bargaining in thirteen OECD countries. It also emphasizes the problems encountered when implementing this type of policy. and attempts to establish its real and potential impact.
In response to the potential threat of global warming many countries are considering cost effective policies to reduce greenhouse gas emissions. In this context much attention has been paid to taxes levied on the carbon content of fuels (carbon taxes), since they are a potentially efficient economic instrument for reducing emissions of CO2, the main greenhouse gas. This paper first reviews the existing structure of fossil fuel prices and taxes and the relationship between energy prices and carbon emissions. It then analyses the economic cost of superimposing carbon taxes on top of current energy taxes. Finally, using a simple energy demand system, tax reform proposals are simulated including restructuring present energy taxation by the average implicit carbon tax and a carbon cum energy tax similar to the EC proposal ...
This Occasional Paper contains a report by a panel of experts from fourteen OECD Member countries who compared their policies for the employment of persons with disabilities. It is preceded by a preface by a member of the OECD secretariat covering some of the major issues in this regard.
The present paper examines the trade development of Pacific-Asian economies during the past decade from the perspective of regional integration. Its main focus is on the development of intra-regional and intra-industry trade. It provides some statistical evidence for the often-heard argument that the remarkable development of Pacific-Asian trade in the 1980s should be seen as a case for the "flying-geese" pattern of trade development, which is basically of inter-industry type. It argues, however, that developments since the mid-1980s have provided a new dimension to the regional division of labour — increasing the opportunities for intra-industry trade (IIT) among the Pacific-Asian economies.
The empirical analysis based on the Grubel-Lloyd index of IIT in manufactures suggests that large increases in the level of IIT in the developing economies of the region is a consequence of "globalisation" of corporate activities in the United States and, more recently, in Japan and the ...
Buoyant oil revenues in the 1970s provided Nigeria with the basis for large but unsustainable increases in incomes and public expenditure. Agriculture was neglected and the economy became heavily dependent on crude oil and more vulnerable to external shocks. These led to fundamental changes in the structure of the Nigerian economy. When the oil revenues collapsed following the glut in international oil market in the early 1980s, the country faced an acute economic crisis. Unable to shift gears in the face of changing economic fortunes the country resorted to external borrowing. Instead of adjusting, the government adopted a policy of deficit financing. The deficits were financed by borrowing from international capital markets (ICM), a drawn-down of external reserves, and by accumulation of arrears on external trade payments. The debt stock grew rapidly from $3.4 billion in 1980 to $17.3 billion in 1985 and $32.9 billion in 1990.
In 1986, the government adopted a structural ...
Economic integration in the Pacific region — which includes the United States, Canada and Mexico — is rapidly occurring, primarily as a result of intra-regional capital flows. Private-sector business opportunities between the west and east coasts and the northern and southern rims of the Pacific region are stimulating ever-larger flows of goods, services, capital, technology, and people among these economies.
Seven trends in the world economy are likely to strengthen these regional business relationships. They are: (1) the evolution of US-Soviet relations from conflict to co-operation, (2) the collapse of communism in the Soviet Union and eastern Europe, (3) the reversal of the "locomotive" role of the United States, (4) the ascendancy of Japan as the world's banker, (5) the econornic integration of Europe, (6) the economic integration of North America, and (7) the declining relevance of the GATT. However, a regional trend, the growing friction between Japan and the United ...
In recent years, there has been a rapid spread of economic instruments (EIs) in environmental policies of OECD Member countries. The application of EIs has gained wider political acceptability and, in a growing number of cases, they have come to have incentive rather than merely revenue-raising effects. In Sweden, eco-taxes have been introduced as part of a broad fiscal reform, while in other countries the approach is more piecemeal. Virtually without exception, EIs are employed in combination with regulations and other policy instruments.
Developing countries stand to learn from the OECD experience with EIs, but they often face unique challenges as well as opportunities in applying such instruments. Resource and other prices have historically been distorted in such economies, so correcting such distortions is a prerequisite to the effective use of EIs. Also, underdeveloped markets, public enterprises with soft budget constraints, and high rates of inflation can all undermine the ...
This paper reviews the methods used for estimating potential output in OECD countries and the use of the resulting output gaps for the calculation of structural budget balances. The "split time trend" method for estimating trend output that was previously used for calculating structural budget balances is compared with two alternative methods, smoothing real GDP using a Hodrick Prescott filter and estimating potential output using a production function approach. It is concluded that the production function approach for estimating potential output provides the best method for estimating output gaps and for calculating structural budget balances, with the results obtained by smoothing GDP providing a cross check. New tax and expenditure elasticities, along with the potential output gaps, are used to derive structural budget balances ...
Economic globalization is increasingly challenging traditional, closedeconomy intuition about linkages between demand, supply, and employment. In some parts of the world, substantial employment growth is arising from external demand while, in other areas, there is growing concern that domestic demand is being diverted to external sources of supply and employment. To better understand and predict how employment patterns will evolve with expanding international trade, the best of labor market theory must be brought into an empirical general equilibrium framework which can capture these complex interactions. The purpose of the present study is to review the innovative recent literature on labor markets and distill essential elements which can be implemented in a practical manner. The result is a taxonomy of new labor market theories and an agenda for new empirical research on wage and employment adjustment ...