Working Papers
2001
April 1, 2001
Inflation and Financial Depth
Description: There is now a substantial theoretical literature arguing that inflation impedes financial deepening. Furthermore, it has been hypothesized that the relationship is a nonlinear one, in that there is a threshold level of inflation below which inflation has a positive effect on financial depth, but above which the effect turns negative. Using a large cross-country sample, empirical support is found for the existence of such a threshold. The estimates indicate that the threshold level of inflation is generally between 3 and 6 percent a year, depending on the specific measure of financial depth that is used.
April 1, 2001
How Does Privatization Work? Ownership Concentration and Enterprise Performance in Ukraine
Description: This paper investigates the relationship between ownership concentration and enterprise performance in Ukraine. Using data on 376 medium and large enterprises, it finds that ownership concentration is positively associated with enterprise performance in Ukraine. The paper also finds that concentration of ownership by foreign companies and banks is associated with better performance than ownership concentrated by the domestic owners. Ownership by Ukrainian investment funds and holding companies does not have a positive effect on performance. In contrast to predictions by many observers of early transition, privatization methods had a lasting effect on ownership structure in Ukraine.
April 1, 2001
The Equilibrium Distributions of Value for Risky Stocks and Bonds
Description: Within a unified theory for stocks and corporate bonds, based on dynamic optimization by investors, this paper derives analytical expressions for the momentary distributions of expected price, respectively known to approximate lognormal with systematic deviations (high peak, fat tail) and double exponential (for credit risk). Market equilibrium is regarded as a dynamic equilibrium characterized by a time-invariant probability distribution over microfinancial states, marginal redistributions of portfolios are regarded as indistinguishable, and real and fiat assets are regarded as essentially distinct. The formalism provides a basis for decomposing value changes by market fundamentals, investor sentiment, and investor acquisition of securities.
0001
January 1, 0001
$name
January 1, 0001
$name
January 1, 0001
$name
January 1, 0001
$name
2001
March 1, 2001
International Trade in Manufactured Products: A Ricardo-Heckscher-Ohlin Explanation with Monopolistic Competition
Description: A large data set on trade in manufactured products is used to evaluate the performance of a model that combines both the Ricardian and Heckscher-Ohlin effects and incorporates monopolistic competition. The paper estimates a relation implied by the model to explain relative sectoral exports of major countries to a number of important markets, using 1970-90 data for nine manufacturing sectors. The relation fits the data well and variables suggested by both traditional and new trade models play an important role in explaining relative exports.
March 1, 2001
Sustaining Fixed Exchange Rates: A Model with Debt and Institutions
Description: Fixed exchange rate regimes have come into disrepute, as their defense has become all but impossible. Yet, while a determined attack on a currency cannot be prevented or, ultimately, withstood, policies can reduce the vulnerability of a country to such attacks. The paper develops an analytical framework of costs and benefits of a fixed exchange rate, based on the ability of a developing country to meet its external obligations while achieving a maximum rate of long-term output growth. The focus is on how structural policies and institutions influence the degree of dependence of a country on a fixed exchange rate regime.
March 1, 2001
Electoral System and Public Spending
Description: We study the effects of electoral institutions on the size and composition of public expenditure in OECD and Latin American countries. We present a model emphasizing the distinction between purchases of goods and services, which are easier to target geographically, and transfers, which are easier to target across social groups. Voters have an incentive to elect representatives more prone to transfer spending in proportional systems. The model also predicts higher primary spending in proportional systems when the share of transfer spending is high. After defining rigorous measures of proportionality, we find considerable empirical support for our predictions.