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This paper clarifies one of the puzzling results of the economic growth literature: the impact of military expenditure is frequently found to be non-significant or negative, yet most countries spend a large fraction of their GDP on... more
This paper clarifies one of the puzzling results of the economic growth literature: the impact of military expenditure is frequently found to be non-significant or negative, yet most countries spend a large fraction of their GDP on defense and the military. We start by empirical evaluation of the non-linear interactions between military expenditure, external threats, corruption, and other relevant controls. While growth falls with higher levels of military spending, given the values of the other independent variables, we show that military expenditure in the presence of threats increases growth. We explain the presence of these nonlinearities in an extended version of Barro and Sala-i-Martin (1995), allowing the dependence of growth on the severity of external threats, and on the effective military expenditure associated with these threats. JEL Classification: E62, F43, N10, O41, O47
This paper presents empirical evidence on asset market linkages between China and Asia and how these linkages have shifted during and after the global financial crisis of 2008–2009. We find only weak cross-country linkages in longer-term... more
This paper presents empirical evidence on asset market linkages between China and Asia and how these linkages have shifted during and after the global financial crisis of 2008–2009. We find only weak cross-country linkages in longer-term interest rates, but much stronger linkages in equity markets. This finding is consistent with the greater development and liberalization of equity markets relative to bond markets in China, as well as increasing business and trade linkages in the region. We also find that the strength of the correlation of equity prices changes between China and other Asia countries increased markedly during the crisis and has remained high in recent years. We attribute this development to greater “attentiveness” of international investors to China’s role as a source and destination of equity finance during the crisis rather than to any greater financial deepening and liberalization, as China did not implement any major policy measures during this period. By contras...
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This year's Pacific Basin conference brought together papers on a variety of international topics, including international pricing behavior and exchange rates, foreign reserve management, the efficacy of capital controls, Asian... more
This year's Pacific Basin conference brought together papers on a variety of international topics, including international pricing behavior and exchange rates, foreign reserve management, the efficacy of capital controls, Asian financial market integration, and developments in China. ; This Economic Letter summarizes the papers presented at the 2007 Annual Pacific Basin conference held at the Federal Reserve Bank of San Francisco on June 8-9, 2007, under the sponsorship of the Bank's Center for Pacific Basin Studies. The papers are listed at the end and are available online.
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Since the East Asian crises of 1997, a number of East Asian economies have allowed greater exchange rate flexibility and abandoned monetary targets in favor of inflation targeting, apparently because the perceived usefulness of money as a... more
Since the East Asian crises of 1997, a number of East Asian economies have allowed greater exchange rate flexibility and abandoned monetary targets in favor of inflation targeting, apparently because the perceived usefulness of money as a predictor of inflation, i.e. the information content of money, has fallen. In this paper, we discuss factors that are likely to have influenced the stability of the relationship between money and inflation, particularly in the 1990s, and then assess this relationship in a set of East Asian economies. We focus on (1) the stability of the behavior of the velocity of money; (2) the ability of money growth to predict inflation as measured by tests of Granger causality, and (3) the contribution of money to the variance of the forecast error of inflation. We find evidence that, with a few exceptions in which capital flows were particularly large, velocity remained generally stable, as did the relationship between money growth and inflation. However, the contribution of money to inflation forecast errors fell considerably in the 1990s, reducing its value as an information variable to monetary authorities.
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ABSTRACT
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ABSTRACT
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This year's Pacific Basin conference brought together ten papers on a variety of international topics, including the determinants of the U.S. current account deficit, the interest rate parity puzzle, monetary integration in East Asia,... more
This year's Pacific Basin conference brought together ten papers on a variety of international topics, including the determinants of the U.S. current account deficit, the interest rate parity puzzle, monetary integration in East Asia, and other developments in Asia. ; This Economic Letter summarizes the papers presented at the annual Pacific Basin Conference held at the Federal Reserve Bank of San Francisco on June 16-17, 2006, under the sponsorship of the Bank's Center for Pacific Basin Studies. The papers are listed at the end and are available online.
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ABSTRACT This study analyzes the effects of right-wing extremism on the well-being of immigrants based on data from the German Socio-Economic Panel (SOEP) for the years 1984 to 2006 merged with state-level information on election... more
ABSTRACT This study analyzes the effects of right-wing extremism on the well-being of immigrants based on data from the German Socio-Economic Panel (SOEP) for the years 1984 to 2006 merged with state-level information on election outcomes. The results show that the life satisfaction of immigrants is significantly reduced if right-wing extremism in the native population increases. Moreover ; the life satisfaction of highly educated immigrants is affected more strongly than that of low-skilled immigrants. This supports the view that policies aimed at making immigration more attractive to the high-skilled have to include measures that reduce xenophobic attitudes in the native population. --
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ABSTRACT This article surveys the literature on multi‐period models of foreign borrowing to shed light on the issue of how much a country should borrow and under what circumstances there is a role for public intervention. It identifies... more
ABSTRACT This article surveys the literature on multi‐period models of foreign borrowing to shed light on the issue of how much a country should borrow and under what circumstances there is a role for public intervention. It identifies the essential structural elements of multi‐period models and draws out the ramifications of the alternative specifications adopted. It discusses the insights and shortcomings of three classes of models: non‐optimising, optimising borrower and jointly optimising borrower and lender.
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" Macroeconomic fundamentals aren't enough explain the currency crises of the 1990s," international economist Andrew Rose told a CEPR lunchtime meeting on 2 October. Rose told the... more
" Macroeconomic fundamentals aren't enough explain the currency crises of the 1990s," international economist Andrew Rose told a CEPR lunchtime meeting on 2 October. Rose told the audience" Currency crises are regional because trade is regional. Contagion tends to spread between countries with tight trade linkages. This linkage is intuitive, economically significant, statistically robust and the key to understanding the regional nature of speculative attacks." Rose went on to argue that: