Working Papers
1998
April 1, 1998
Rethinking Public Pension Reform Initiatives
Description: This paper argues that there are significant risks, limitations, and complications associated with reliance upon mandatory DC, fully funded schemes as the dominant public pension pillar. Policies to limit risks may result in the government being reinjected into playing an important financial role in the provision of social insurance. For many countries, the principal source of old age support should thus derive from a well-formulated, public DB pillar, with a significant amount of prefunding. A DC/FF pillar can play a useful supplemental role in a multi-pillar system for the accumulation of pension savings.
April 1, 1998
Money Demand and Regional Monetary Policy in the West African Economic and Monetary Union
Description: Regional monetary integration, financial liberalization, and the adoption of indirect policy instruments have changed the conditions for monetary policy in the West African Economic and Monetary Union (WAEMU). The stability of money demand has become a crucial element for monetary policy. This paper presents empirical money demand estimations for regional monetary aggregates and analyzes their stability and forecast performance. The estimations result in a stable relationship for narrow money (M1). Consequently, the region’;s central bank, the BCEAO, can continue to conduct monetary policy in line with the fixed exchange rate system if it succeeds in maintaining financial stability.
April 1, 1998
From Transition to Market: Evidence and Growth Prospects
Description: This paper presents evidence on the behavior of output and inflation in the transition economies during 1992–95. A regression analysis explores the differences in output performance across the transition economies during this period. The paper then engages in a numerical, somewhat speculative, exercise to assess the long-run growth potential of the transition economies. It concludes that it should take about 20 years for the faster reformers to reach current OECD per capita levels.
Notes: This paper was prepared for an OECD Volume on Lessons from the Economic Transition: Central and Eastern Europe in the 1990s and presented at the OECD colloquium, held in Paris on May 29-30, 1996.
April 1, 1998
“Globalization” and Relocation in a Vertically Differentiated Industry
Description: This paper uses a vertical differentiation duopoly framework to analyze firms’ relocation decisions, when the removal of trade barriers or restrictions on capital outflows or inflows (“globalization”) allows them to serve the domestic market through foreign plants in low-wage countries. The relocation of the entire industry yields net welfare costs, but the relocation of one (and only one) firm, may be welfare improving. When the economy is “high-(or low-) quality biased,” the relocation of the firm producing the high- (or low-) quality variant is preferred, on welfare terms, to that of other firms, if the wage differential is large enough.
April 1, 1998
Immigration Flows and Regional Labor Market Dynamics
Description: The paper analyzes the ability of a regional labor market to absorb growing flows of immigrant workers with declining levels of skills during relatively high unemployment. The impact of the size of the flow and the skill characteristics of the immigrants are analyzed. It is found that immigration is positively related to unemployment in the short run but in the long run is negatively related. Also, a higher average skill level among immigrants makes them more effective in their job search in the short run. Finally, increasing the discrepancy between the skill distribution of immigrants and that of the existing workforce is desirable, as both types of labor appear to be complements in the short-run.
April 1, 1998
Anticipation and Surprises in Central Bank Interest Rate Policy: The Case of the Bundesbank
Description: Market reaction to a change in official interest rates will depend on the extent to which the change is anticipated, and on how it is interpreted as a signal of future policy. In this paper, a technique is developed to separate the anticipated and unanticipated components of such changes and is applied to estimate the response of Euro-deutsch mark interest rates to adjustments in the Bundesbank’s Lombard and discount rates. The results shed light on the efficiency of this market and on the scope for policy signaling by the central bank.
Notes: Also published in Staff Papers, Vol. 45, No. 4, December 1998.
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