Working Papers
1992
February 1, 1992
Assessing Eastern Europe's Capital Needs
Description: The paper aims at assessing the capital needs of Eastern Europe in catching up to EC standards of living using the framework of a CES (constant elasticity of substitution) production function model. This function, parameterized on the EC, is assumed to apply with certain inefficiency factors in Eastern Europe in 1992. Quantitative results, given the heroic set of assumptions required, are bounded by large ranges. The approach provides a framework for assessing the factors which will determine the future capital needs in Eastern Europe and underscores the crucial role of efficiency gains in this process.
Notes: Also published in Staff Papers, Vol. 39, No. 4, December 1992.
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1992
January 1, 1992
Distortionary Taxation and the Debt Laffer Curve
Description: This paper highlights the importance of the role of the domestic tax system in determining the economic consequences of an external debt overhang. A simple taxation scheme is specified and it is shown that a country can be on the “wrong side” of its debt Laffer curve only if it is on the wrong side of its tax Laffer curve. The analysis indicates that fairly strong, and probably unrealistic, assumptions about the domestic tax system are needed to argue that the investment disincentives associated with the debt overhang are large enough to place a country on the wrong side of its debt Laffer curve.
January 1, 1992
China's Foreign Trade Behavior in the 1980's: An Empirical Analysis
Description: This paper studies the behavior of China’s foreign trade in the 1980s. Chinese customs data are used to construct, for the first time, quarterly unit value and volume series that are then used to estimate foreign trade income and price elasticities. The estimated export supply price elasticities are negative and became even more negative after the reforms in 1985. The import price elasticity is very close to minus one. These results suggest that administrative controls still have a dominant effect on China’s trade and may also suggest that reforms in the management system of Chinese enterprises were not sufficient to create profit maximizing behavior by managers.
January 1, 1992
Econometric Analysis of Industrial Country Commodity Exports
Description: This paper examines the composition of primary commodity exports by industrial countries and contrasts this composition with that of the exports by developing countries. Both the share of industrial countries’ commodity exports in world commodity exports, as well as in their own total merchandize exports, is examined over time and across different commodities and geographical areas. The paper then specifies and empirically estimates an econometric model of the demand for and the supply of commodity exports by industrial countries. The model is estimated for five groups of industrial countries and the parameters of the model are compared with those available for the developing countries.
Notes: Examines composition of primary commodity exports by industrial countries and contrasts this composition with that of exports by developing countries.
January 1, 1992
Foreign Currency Deposits and the Demand for Money in Developing Countries
Description: This paper examines the relative demands for domestic and foreign currency deposits by residents of developing countries. A dynamic currency substitution model that incorporates forward-looking rational expectations is formulated and then estimated for a group of ten developing countries. The results indicate that the foreign rate of interest and the expected rate of depreciation of the parallel market exchange rate are important factors in the choice between holding domestic money or switching to foreign currency deposits held abroad. From an empirical standpoint, the forward-looking framework adopted here also turns out to be superior to the conventional currency-substitution model.