Browse by: "F"

From 1983 to 1989 Mexico pursued a strategy of integration into the global economy and reducing dependence on the US economy. That strategy was based on bilateral sectoral negotiations with the United States and multilateral negotiations through GATT to obtain recipiocity for Mexico’s own trade liberalisation, combined with efforts to attract Japanese and European FDI. Economic reforms included rather harsh macroeconomic adjustments (notably fiscal-deficit reduction), which lowered annual inflation from 200 to 20 per cent, and trade liberalisation, which has helped to make Mexico a leading exporter of manufactures. More gradual and pragmatic reforms were undertaken to promote FDI, deregulate industry and privatise state enterprises.

The globalisation strategy was perceived as too ambitious, however, and abandoned in mid-1989 for three principal reasons: the US-Canada FTA was seen as a threat, changes in Eastern Europe were thought to undermine possibilities for significantly ...

This paper is one of four in this Working Paper Series, focusing on financial liberalisation, along with those of Kupiec, Driscoll and Blundell-Wignall and Browne. It surveys recent work, both theoretical and empirical, on the question of market efficiency in various asset markets. A number of studies of behaviour in the foreign exchange market, which provide evidence of departures from efficiency, are described. The paper summarises and discusses the implications of research on the effects of noise trading by "irrational" groups of agents, with particular reference to the stock market. The housing market is also considered as an example where pronounced price "bubbles" have appeared. The paper concludes with a discussion of the potential welfare impact of departures from efficiency in the foreign exchange market, where it is argued that the case for some form of intervention is strongest ...

This paper is one of four in this Working Paper series, focusing on financial liberalisation, along with those by Miller and Weller, Driscoll, and Blundell-Wignall and Browne. It examines the historical volatilities of stock, bond and foreign currency markets over alternative periods differing roughly by the degree of financial innovation and globalisation. It characterises trends in gross volatility, and the degree and manner in which volatility in financial markets has changed, the real economic consequences of transitory periods of excess volatility, and discusses some of the financial policies proposed to limit volatility. The results suggest that the past two decades have coincided with a world-wide increase in the average levels of volatility in stock returns, corporate bond yields and exchange rates, accompanied by a general increase in the strength of the positive correlations among national stock returns and the conditional volatilities of these returns. Evidence suggests ...

The paper addresses the question of whether financial liberalisation and innovation has significantly altered consumption behaviour by reducing liquidity constraints as capital markets become more flexible. A consumption model in which the permanent income hypothesis and extreme Keynesian consumption functions are nested as special cases is the starting point for this analysis. Estimated values for the sensitivity of consumption to current income for different time periods and for several OECD countries are assessed and compared in the light of various econometric properties, country specific liberalisation measures and a variety of proxies reflecting changing liquidity constraints ...

All countries in Central and Eastern Europe are experiencing a switch from labour hoarding to labour shedding with rapidly rising unemployment. Identifying each country's specific labour market problems - in particular, those groups which are most vulnerable to unemployment - will be essential for developing appropriate policies. Based on detailed statistical information being collected by the OECD, this paper provides an overview of labour markets in Central and Eastern Europe, both prior to and since the start of the transition process.

Section I of this paper describes the main characteristics of employment and wage structures which have been inherited from the former centrally-planned system in Central and Eastern Europe and also analyses longer-run demographic and labour force trends. Section II discusses more recent labour market developments, including the nature of employment losses, job creation in the private sector and the characteristics of the unemployed. Finally, some specific recommendations are provided on how to improve monitoring systems of labour market developments in these countries.

This paper reviews fiscal policy, government indebtedness and its implications for economic performance in OECD countries. Government debt, expenditure and revenue relative to GDP have all risen significantly over the past 15 years and in several countries these trends are unsustainable. The macroeconomic implications of high fiscal deficits and debt levels are considered and the paper finds that while monetary policy played a clear role in generating recovery, the effects of fiscal policy are more mixed. Looking forward, Member countries’ plans for fiscal consolidation are ambitious, but if sustained economic growth is achieved, these plans are achievable. However, if growth is slower, then further fiscal consolidation efforts would be required to keep public debt under control. Finally, the paper considers ways of improving the control over expenditure and the budget process, so as to achieve better fiscal outcomes ...

The steel industry in OECD countries has undergone profound change during the past several decades. Capacity has been reduced significantly, while substantial investment has been made to improve processing efficiency and product quality. Two key technological developments have driven this process. The first is rapid expansion of the use of continuous casting, a technology that has improved product quality, reduced energy consumption and greatly increased efficiency. The second is significant growth in electric furnace steelmaking, particularly at highly efficient small-scale mini-mills, that produce an expanding range of steel products using ferrous scrap as the principal raw material. These and other technological changes, combined with plant closures and other restructuring, have greatly reduced industry employment. Despite growth in finished steel production, employment has fallen by close to 40 per cent in the OECD area since 1980.

This document examines how the employment ...

This paper reviews fiscal relations within the European Union in the context of the theory of fiscal federalism and of the principle of subsidiarity. It analyses the fiscal policy implications of the introduction of the single currency, tax harmonisation and competition issues and spending at the EU level. It also speculates as to whether there are economic gains from centralising more expenditure functions at the EU level ...

The reform of public pension systems has become a key policy issue in many countries. Because conventional approaches to reform largely unfunded retirement income schemes prove politically and economically difficult, attention has focused on the option of a partial shift towards funded provisions. Yet this too presents problems. This paper outlines the potential benefits of such a shift and highlights the main fiscal options and constraints. The liabilities to the current generation of retirees and workers under an unfunded pension scheme constitute a huge, hidden public debt. Most countries find that making this implicit debt fully explicit, repaying it and thus reversing the initial redistribution towards the start-up generation, lie beyond their political, economic and fiscal capacities. Thus, a shift requires simultaneous steps of the following sort: (i) a benefit reform of the unfunded scheme, reducing the implicit debt; (ii) a redesign of the basic tier remaining unfunded, to ...

Against the background of Brazil’s highly unequal distribution of income and wealth, and its history of alienation and passivity of the poor, in particular during the years of political authoritarianism, this paper shows how an active civil society, driven by ethical concerns, has, since 1993, nudged democratic government at different levels as well as enterprises of the public sector into undertakings which alleviate poverty directly in various ways and open up new perspectives for a number of the poor.

While the reach and impact of these programmes is still rather limited in the face of the country’s 32 million “extremely poor” (1990), and data are lacking for a comprehensive evaluation, the approach followed deserves attention as a large-scale experiment which introduces new political practices, based on dialogue between administrations and committees of citizens about priorities as well as implementation and monitoring of activities. In political terms, the main achievement is ...

Different categories of foreign portfolio investors in Korea have differences as well as similarities in their trading behavior before and during the currency crisis. First, non-resident institutional investors are always positive feedback traders, whereas resident investors were negative feedback (contrarian) traders before the crisis but switch to be positive feedback traders during the crisis. Second, individual investors herd significantly more than institutional investors. Non-resident (institutional as well individual) investors herd significantly more than their resident counterparts. Third, differences in the Western and Korean news coverage are correlated with differences in net selling by non-resident investors relative to resident investors ...

The relationships between trade and foreign investment (FDI) are at the core of globalisation. Analytical work has recently been developed by OECD in order to explore the nature of these links in quantitative terms. This report combines the previous more technical work developed over the last three years.

This empirical work revealed the complexity of these links but, at the same time, showed the main and positive influence of foreign direct investment on international trade particularly after the mid– 1980s. Empirical results show that foreign direct investment abroad stimulates the growth of exports from countries of origin and consequently this investment is complementary to trade ...

The relationships between trade and foreign investment (FDI) are at the core of globalisation. Analytical work has recently been developed by OECD in order to explore the nature of these links in quantitative terms. This report combines the previous more technical work developed over the last three years.

This empirical work revealed the complexity of these links but, at the same time, showed the main and positive influence of foreign direct investment on international trade particularly after the mid–1980s. Empirical results show that foreign direct investment abroad stimulates the growth of exports from countries of origin and consequently this investment is complementary to trade ...

This paper aims at providing an overview of the theoretical considerations and a review of the empirical literature on the relationship between finance and growth. Section I describes the role of financial development in economic growth at the macro level, both theoretically and empirically. Section II examines the role of corporate finance in firm-level performance, especially focusing on the role of “internal funds” and “internal capital markets”. Section III presents a comparative analysis of financial systems, and analyses both the Asian crisis and the US venture capital phenomenon from this perspective. Section IV presents some policy implications and conclusions ...

Can devaluations and exchange controls be co-ordinated at the regional or global level, to lessen their beggar-thy-neighbour character? Probably not without co-ordination mechanisms among monetary and fiscal authorities like the ones found in the EU. How precisely the mechanisms may apply to CEFTA, ASEAN or Mercosul remains to be thoroughly investigated. The claim of this paper is that there does not seem to be a better perspective that the one defended here.

Over and above the parallels between the 1997-99 emerging markets crisis and the Mexican devaluation of December 1994, the lessons from the crises in the ERM may thus be helpful in designing a new international financial architecture. In effect, the crises were overcome by the ERM code of conduct. With the experience gathered during the first year of the euro, a new code of conduct may be developing, which acknowledges the importance of international banking supervision, including better risk management along the lines proposed ...

In many industries, competition is far from perfect and managerial efficiency (or a fixed cost) varies among firms. However, traditional measurement of technological progress assumes perfect competition and no fixed cost. This paper incorporates these two factors in the technological-progress measurement and investigates the biases caused by their omission. We show that if capital growth exceeds non-capital-input growth and that firms earn a positive pure profit, then traditional measurement underestimates the true technological progress. We apply this methodology to Japanese and US industries, and find that imperfect competition and managerial efficiency are important. However, the magnitude of the bias is not large ...

All Member States of the EU and countries from Central and Eastern Europe use agencies of various shapes and sizes as part of their system of public administration. The legal forms vary widely from country to country depending on the legal tradition and the system of administration. Public agencies, if properly designed and managed, provide an opportunity for decentralising public administration, achieving greater transparency in government operations, and improving the efficiency and effectiveness with which government services are delivered to end users. Agencies can thus be used for economically and socially beneficial reasons, and indeed are sometimes employed as a stepping stone to more radical options, e.g. the privatisation of government services. However, agencies can also be misused for purposes that contravene the tenets of good governance and sound financial management. They can be a source of inefficiency, unregulated and covert expenditures, political favouritism and corruption. This paper originated in a request from the Ministry of Finance of the Czech Republic for SIGMA advice in developing new legal provisions for the financial management of public agencies. However, this subject cannot be addressed without avoiding the broader context. This paper has expanded well beyond the scope of the original mandate. It highlights the practice and experience of five EU Member States with very different legal systems and administrative structures. It focuses on issues relating to the financial management of public agencies but also discusses, in less detail, other issues concerning legal structures and governance. No single good practice "model" exists in this complex field. International best practice is still evolving. Moreover, we recommend a cautious approach by countries that are tempted to transpose elements of the agency models applied in countries such as New Zealand, Sweden and the United Kingdom. Would-be reformers should consider whether the legal and administrative structures are comparable, and the necessary systems of regulation, control and open reporting are in place and can be enforced. Whilst avoiding simplistic solutions, the paper includes recommendations that policy makers in Central and Eastern Europe should take into account before embarking on major reforms in this area.