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Begin New Search Content Type Commentary and Analysis Publication Year within 25 Years

2301. The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy

Author:
Lorenzo Caliendo, Fernando Parro, Esteban Rossi-Hansberg, and Pierre-Daniel Sarte
Publication Date:
10-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to the rest of the economy. The quantitative model we develop features pairwise interregional trade across all 50 U.S. states, 26 traded and non-traded industries, labor as a mobile factor, and structures and land as an immobile factor. We allow for sectoral linkages in the form of an intermediate input structure that matches the U.S. input-output matrix. Using data on trade flows by industry between states, as well as other regional and industry data, we obtain the aggregate, regional and sectoral elasticities of measured TFP, GDP, and employment to regional and sectoral productivity changes. We find that such elasticities can vary significantly depending on the sectors and regions affected and are importantly determined by the spatial structure of the US economy. We highlight the role of these elasticities by tracing out the effects of productivity gains in California in the Computers and Electronics industry between 2002 and 2007 on all other U.S. sectors and regions.
Topic:
Economics, Science and Technology, GDP, Regionalism, and Productivity
Political Geography:
North America and United States of America

2302. Financial Frictions and Macroeconomic Fluctuations in Emerging Economies

Author:
Ozge Akinci
Publication Date:
10-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Estimated dynamic models of business cycles in emerging markets deliver counterfactual predictions for the country risk premium. In particular, the country interest rate predicted by these models is acyclical or procyclical, whereas it is countercyclical in the data. This paper proposes and estimates a small open economy model of the emerging-market business cycle in which a time-varying country risk premium emerges endogenously. In the proposed model, a firm's borrowing rate adjusts countercyclically as the default threshold of the firm depends on the state of the macroeconomy. I econometrically estimate the proposed model and find that it can account for the volatility and the countercyclicality of country risk premium as well as for other key emerging market business cycle moments. Time varying uncertainty in firm specific productivity contributes to delivering a countercyclical default rate and explains 70 percent of the variances in the trade balance and in the country risk premium. Finally, I find the predicted contribution of nonstationary productivity shocks in explaining output variations falls between the extremely high and extremely low values reported in the literature.
Topic:
Economics, Business, Economic Theory, Risk, and Trade
Political Geography:
Global Focus

2303. Banks, Capital Flows and Financial Crises

Author:
Ozge Akinci and Albert Queralto
Publication Date:
10-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper proposes a macroeconomic model with financial intermediaries (banks), in which banks face occasionally binding leverage constraints and may endogenously affect the strength of their balance sheets by issuing new equity. The model can account for occasional financial crises as a result of the nonlinearity induced by the constraint. Banks' precautionary equity issuance makes financial crises infrequent events occurring along with "regular" business cycle fluctuations. We show that an episode of capital infl ows and rapid credit expansion, triggered by low country interest rates, leads banks to endogenously decrease the rate of equity issuance, contributing to an increase in the likelihood of a crisis. Macroprudential policies directed at strengthening banks' balance sheets, such as capital requirements, are shown to lower the probability of financial crises and to enhance welfare.
Topic:
Financial Crisis, Capital Flows, Banks, Economic Theory, and Interest Rates
Political Geography:
Global Focus

2304. Generating Options-Implied Probability Densities to Understand Oil Market Events

Author:
Deepa Dhume Datta, Juan M. Londono, and Landon J. Ross
Publication Date:
10-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We investigate the informational content of options-implied probability density functions (PDFs) for the future price of oil. Using a semiparametric variant of the methodology in Breeden and Litzenberger (1978), we investigate the fit and smoothness of distributions derived from alternative PDF estimation methods, and develop a set of robust summary statistics. Using PDFs estimated around episodes of high geopolitical tensions, oil supply disruptions, and macroeconomic data releases, we explore the extent to which oil price movements are expected or unexpected, and whether agents believe these movements to be persistent or temporary.
Topic:
Energy Policy, International Trade and Finance, Markets, Oil, Economic Theory, and Models
Political Geography:
Global Focus

2305. The Replacement of Safe Assets: Evidence from the U.S. Bond Portfolio

Author:
Carol C. Bertaut, Alexandra Tabova, and Vivian Wong
Publication Date:
11-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The expansion in financial sector "safe" assets, largely in the form of structured products from the U.S. and the Caribbean, in the lead-up to the global financial crisis has by now been fairly well documented. Using a unique dataset derived from security-level data on U.S. portfolio holdings of foreign securities, we show that since the crisis, it is mostly the foreign financial sector that appears to have met U.S. demand for safe and liquid investment assets by expanding its supply of debt securities. We also find a strong negative correlation between the foreign share of the U.S. financial bond portfolio and measures of U.S. safe assets availability: providing evidence on the importance of foreign-issued financial sector debt as a substitute when U.S. issued "safe" assets are scarce. Furthermore, although U.S. investors continue to tap foreign financial markets for "safe" assets, we show that the type of foreign financial debt that fills this portfolio niche post-crisis is quite different than pre-crisis. Post-crisis, we find that U.S. investors have replaced offshore-issued structured securities with high-grade U.S. dollar-denominated financial debt issued from a small group of OECD countries (most notably Australia and Canada). Lastly, these developments have led to a decline in home bias in the U.S. financial bond portfolio that we are able to document for the first time.
Topic:
Foreign Exchange, Financial Crisis, Investment, Fiscal Policy, and Bonds
Political Geography:
Caribbean, North America, and United States of America

2306. Gains from Offshoring? Evidence from U.S. Microdata

Author:
Ryan Monarch, Jooyoun Park, and Jagadeesh Sivadasan
Publication Date:
11-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to confidential data on U.S. firm operations. We exploit these data to assess how offshoring affects domestic firm-level aggregate employment, output, wages and productivity. Consistent with heterogenous firm models where offshoring involves a fixed cost, we find that the average offshoring firm is larger and more productive than the average non-offshorer. After initiating offshoring, firms experience large declines in employment (46.2 per cent), output (38.5 per cent) and capital (28.8 per cent) relative to their industry peers. We find no significant change in average wages or in total factor productivity measures for offshoring firms. These results are consistent across two separate difference-in-differences (DID) approaches, an instrumental variables approach, and a number of robustness checks. Thus, we find offshoring to be a strong substitute for domestic activity in this large sample of offshoring events.
Topic:
Industrial Policy, Labor Issues, Manufacturing, Trade, Outsourcing, and Capital
Political Geography:
North America and United States of America

2307. How Public Information Affects Asymmetrically Informed Lenders: Evidence from a Credit Registry Reform

Author:
M. Ali Choudhary and Anil K. Jain
Publication Date:
11-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We exploit exogenous variation in the amount of public information available to banks about a firm to empirically evaluate the importance of adverse selection in the credit market. A 2006 reform introduced by the State Bank of Pakistan (SBP) reduced the amount of public information available to Pakistani banks about a firm's creditworthiness. Prior to 2006, the SBP published credit information not only about the firm in question but also (aggregate) credit information about the firm's group (where the group was defined as the set of all firms that shared one or more director with the firm in question). After the reform, the SBP stopped providing the aggregate group-level information. We propose a model with differentially informed banks and adverse selection, which generates predictions on how this reform is expected to affect a bank's willingness to lend. The model predicts that adverse selection leads less informed banks to reduce lending compared to more informed banks. We construct a measure for the amount of information each lender has about a firm's group using the set of firm-bank lending pairs prior to the reform. We empirically show those banks with private information about a firm lent relatively more to that firm than other, less-informed banks following the reform. Remarkably, this reduction in lending by less informed banks is true even for banks that had a pre-existing relationship with the firm, suggesting that the strength of prior relationships does not eliminate the problem of imperfect information.
Topic:
Public Opinion, Public Policy, Credit, and Banking
Political Geography:
Pakistan and Middle East

2308. Cyclically Adjusted Current Account Balances

Author:
Jane Haltmaier
Publication Date:
12-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The Great Financial Crisis coincided with a sizable reduction in global external imbalances, defined as the absolute value of the sum of individual country current account surpluses and deficits relative to global GDP. Although current account balances should not respond to a downturn that is uniform across countries, one that hits countries with current account deficits harder than those with surpluses might result in a decline in the global balance. This paper quantifies the cyclical portion of the current account balance for 35 countries using estimates of the severity of the cycle in each country relative to that of its trading partners in conjunction with three estimates of the sensitivity of the current account balance to changes in the output gap. Two of the estimates are derived from equations linking trade to income and the third is derived from the relationship between changes in current account balances and changes in output gap differentials. The main result is that the bulk of the reduction in the global current account imbalance since 2006 appears to have been structural. Cyclical forces are estimated to account for between 10 and 30 percent of the decline. In the aggregate, the cyclical effect is estimated to be currently holding down the global current account balance by about 1/2 percentage point. However, the size of the cyclical effect is more substantial for some countries. Both surplus and deficit countries have contributed to the decline in the absolute value of the global current account imbalance, but the contribution of the deficit countries is about twice as large as that of the surplus countries. Changes in oil prices have had largely offsetting effects on the global current account balance, but changes in real exchange rates in recent years have contributed to the reduction.
Topic:
Economics, Energy Policy, Oil, Natural Resources, Financial Crisis, GDP, Exchange Rate Policy, and Trade
Political Geography:
Global Focus

2309. Conflict trade: regulating illicit flows to and from war

Author:
Mark B. Taylor
Publication Date:
10-2013
Content Type:
Commentary and Analysis
Institution:
Norwegian Centre for Conflict Resolution
Abstract:
This expert analysis note describes an emerging approach to regulating illicit flows of goods to and from conflict zones. The approach, based on norms of national and international law defining business due diligence, is well suited for dilemmas posed by war economies. Due diligence offers the possibility of excluding goods from global flows if they are produced through human rights abuse or used for conflict financing, while at the same time it can limit harm to livelihoods and avoid the wholesale criminalisation of informal economies. To that end, further inter-governmental policy coordination is needed to define conflict financing under international law and to elaborate an effective regulatory strategy.
Topic:
International Law, Law, Regulation, Trade, Armed Conflict, Supply Chains, and Illicit Financial Flows
Political Geography:
Global Focus

2310. Distinguishing between exploitative and non-exploitative sex involving UN peacekeepers: the wrongs of “zero tolerance”

Author:
Olivera Simić
Publication Date:
11-2013
Content Type:
Commentary and Analysis
Institution:
Norwegian Centre for Conflict Resolution
Abstract:
The links between the presence of peacekeepers and the sexual exploitation and abuse of women have been documented across peace support operations (PSOs). This expert analysis critically analyses the United Nations secretary general’s Bulletin on Special Measures for Protection from Sexual Exploitation and Sexual Abuse, which was promulgated in 2003 to address the problem of sexual exploitation and abuse in the context of PSOs. The expert analysis is concerned with the broad definition of sexual exploitation provided by the bulletin, which includes most sexual relationships and prostitution. It concludes that the bulletin’s definition of sexual exploitation is over inclusive in its “strong discouragement” of sexual relationships and prohibition of prostitution regardless of consent, age and fair remuneration. It argues that, as currently formulated, the bulletin undermines women’s agency and sexual autonomy, and blurs important distinctions between consensual sex and sexual offences. The bulletin thus relies on and perpetuates negative gender stereotypes and imperial hierarchies and, consequently, encourages stigma and discrimination. It casts women as victims and peacekeepers as sexual predators who cannot treat women as equals.
Topic:
United Nations, Peacekeeping, and Sexual Exploitation
Political Geography:
Global Focus

2311. Challenges facing the Colombian peace negotiations

Author:
Jorge Orlando Melo
Publication Date:
11-2013
Content Type:
Commentary and Analysis
Institution:
Norwegian Centre for Conflict Resolution
Abstract:
Peace negotiations between the Colombian government and the Revolutionary Armed Forces of Colombia (FARC) started in 2012 and have advanced slowly but surely. The rules of procedure – no ceasefire, extreme confidentiality on the discussions, a limited agenda, direct negotiations without civil society participation or international mediation – have helped to isolated the talks from the pressures of everyday reality. In May 2013 the parties announced an agreement on point 1 of the agenda, which deals with the land problem. Negotiations on point 2 – the political participation of the guerrillas – started in July 2013. Four further points have to be discussed: the drugs business, the end of armed conflict, justice and compensation for victims, and the procedures for implementing the agreement. Both sides have used peace negotiations to build up their political image. The FARC, besides supporting or promoting social protests of coca-growing peasants, miners, and other groups with social grievances, has made some proposals not in the agenda, such as the convening of a constitutional assembly or a general reform of the state, but has shown flexibility and for the moment has withdrawn most of these proposals. The negotiations will last longer than previously announced, but both sides have good reasons to maintain them beyond the March 2014 elections, provided that progress is made and there are no extreme provocations by the FARC.
Topic:
Negotiation, FARC, Dialogue, and Peace Process
Political Geography:
Colombia and South America

2312. A fragile cold peace: the impact of the Syrian conflict on Israeli-Syrian relations

Author:
Cathrine Thorleifsson
Publication Date:
12-2013
Content Type:
Commentary and Analysis
Institution:
Norwegian Centre for Conflict Resolution
Abstract:
The unfolding Syrian crisis is threatening to end 40 years of cold peace between Syria and Israel. Exchanges of fire between Israeli and Syrian troops, coupled with fear of a new Islamist front, have led Israel to strengthen its military presence in the Golan Heights. Syria’s alliance with Iran and Hizbullah and Israel’s unilateral attacks on military facilities inside Syria have heightened tensions between the two countries. Through their actions and mutual politics of fear Israel and Syria are moving out of a cold peace situation. However, the pressured Syrian regime and its allies are too occupied by the civil war to open a new front. For Israel, a prolonged conflict in Syria could be advantageous because it will weaken its enemies and provide time to forge new strategic alliances with Sunni Arab states.
Topic:
Geopolitics, Syrian War, Hezbollah, and Armed Conflict
Political Geography:
Middle East, Israel, Syria, and Golan Heights

2313. Egypt’s Political Reset

Author:
POMEPS
Publication Date:
07-2013
Content Type:
Commentary and Analysis
Institution:
Project on Middle East Political Science (POMEPS)
Abstract:
How should analysts understand the combination of the June 30 massive popular mobilization and the July 3 military coup against then-President Mohamed Morsi? Should these events be understood as a continuation of the January 25 revolution, a second revolution, a straightforward military coup, or a restoration of the Mubarak-era order? Does the blame for the failure of Egypt’s first popularly elected presidency lie with Morsi and the Muslim Brotherhood, with a recalcitrant opposition, with a resistant state, or with the deep problems which any transitional leadership would have confronted? Can a pathway toward a democratic order still be found?
Topic:
Civil Society, Democratization, and Popular Revolt
Political Geography:
Egypt

2314. Yemen’s National Dialogue

Author:
POMEPS
Publication Date:
03-2013
Content Type:
Commentary and Analysis
Institution:
Project on Middle East Political Science (POMEPS)
Abstract:
Yemen began its long-awaited National Dialogue Conference this week in Sanaa. The NDC hoped to find some zone of consensus for moving forward in its transition from the long rule of Ali Abdullah Saleh. It has been beset by many problems of representation, withdrawals and boycotts, deeply entrenched divisions, and the perception of irrelevance to the real problems of Yemenis. For a while it looked like it might never actually convene.
Topic:
International Affairs
Political Geography:
Yemen

2315. Security Matters

Author:
Centre for European Security Studies
Publication Date:
02-2013
Content Type:
Commentary and Analysis
Institution:
Centre for European Security Studies
Abstract:
In 2012 CESS conducted a range of activities in Turkey in the framework of the “Good Governance of the Security Sector in Turkey” programme: In March we organised a conference and a follow-up training course in Ankara on Financial Accountability and Budgetary Transparency of the Security Sector. During these events we discussed the main procedures in reviewing defence budgets and particular attention was dedicated to the role of the Court of Accounts. It became clear during the proceedings of both events that despite the fact that changes have been made for the better in Turkey with regard to financial oversight of the security sector, most of these changes unfortunately are only made on paper and are still not put into practice. The auditing process clearly lacks key mechanisms that would make the military more accountable. Therefore the Court of Accounts still has no real leverage over the military in terms of auditing defence spending.
Topic:
International Affairs
Political Geography:
Global Focus

2316. Serbia-Kosovo Agree to Normalize Relations, Now to “Normalize” Society

Author:
Charles Cadwell
Publication Date:
04-2013
Content Type:
Commentary and Analysis
Institution:
Urban Institute
Abstract:
The prime ministers of Kosovo and of Serbia initialed an agreement Friday to normalize relations between their two countries. This accomplishment—at the last hour and under the careful and forceful leadership of the EU’s Catherine Ashton—does not, by itself, reconcile the long-standing enmity between neighbors in Kosovo, a territory now recognized by 90 countries as a nation. The devil is in the implementation details yet to be worked out.
Topic:
Treaties and Agreements, Bilateral Relations, Conflict, Negotiation, and Normalization
Political Geography:
Eastern Europe, Kosovo, and Serbia

2317. What Will "Our Turn to Eat" Mean the Day After the Kenyan Elections?

Author:
Charles Cadwell
Publication Date:
03-2013
Content Type:
Commentary and Analysis
Institution:
Urban Institute
Abstract:
All eyes are on Kenya today as some 14 million citizens are expected to vote for an array of candidates for president and other offices. The world hopes to avoid a repeat of the post-election violence in late 2007 and early 2008 that killed some 1,500 people and created as many as 600,000 refugees, a trauma that lingers even five years later. Indeed, one candidate and his running mate are under indictment at the International Criminal Court in The Hague for their role in the 2008 violence. Nonetheless, at a rally last weekend, six presidential candidates held hands and committed to accept the results of the vote. While there are reports of scattered pre-election violence, most observers do not expect a repeat of the last cycle’s mayhem. In this circumstance, it’s easy to lose sight of the dramatic changes in Kenya’s political and governmental structure that take place tomorrow. These elections launch an entirely new constitutional arrangement for Kenya.
Topic:
Government, Elections, Constitution, and Transition
Political Geography:
Kenya and Africa

2318. Lighting the way to municipal prosperity

Author:
Mary Larzelere
Publication Date:
09-2013
Content Type:
Commentary and Analysis
Institution:
Urban Institute
Abstract:
When was the last time you thought about street lights? They’re certainly something I’ve always taken for granted, until a recent trip to Kosovo as part of an Urban Institute program supported by USAID, the Democratic Effective Municipalities Initiative (DEMI). DEMI is a three-year, $20 million project dedicated to helping Kosovo municipalities achieve good governance at the local level. DEMI undertakes steps to make local service delivery more transparent and inclusive, and make local officials more accountable for results, a true challenge in any democracy, let alone a new one such as Kosovo’s.
Topic:
Infrastructure, Electricity, and Public Service
Political Geography:
Eastern Europe and Kosovo

2319. Evolution and Change in Iranian Foreign Policy: From Ideology-Orientedness to Pragmatism

Author:
Cenap Çakmak
Publication Date:
07-2013
Content Type:
Commentary and Analysis
Institution:
BILGESAM (Wise Men Center for Strategic Studies)
Abstract:
There is visible Iranian interest in the so-called Arab Spring process. This growing interest could be attributed the advantages associated with the emerging Shia Crescent in the Middle East which could be favorable to the Iranian interests. However, it is essential to review the overall aspects of Iranian foreign policy to further elaborate on this matter. In other words, the Iranian foreign policy should be prone to have regional ambitions in order to speak of interest in regional developments such as Arab Spring or Shia Crescent. In order to properly analyze whether or not Shia Crescent becomes a stronger reality in the Arab Spring process, it is also relevant to discuss the fundamental tenets and current tendencies of the Iranian foreign policy. For the sake of the discussion, a brief analysis of the Iranian foreign policy after the Islamic revolution in 1979 will be sufficient to determine as to whether Iran may actually be interested in expanding its sphere of influence in the region and taking advantage of the Arab Spring, though there are some similarities with the foreign policy approach before the regime change as well.
Topic:
Foreign Policy, Arab Spring, Ideology, and Pragmatism
Political Geography:
Iran and Middle East

2320. The Militarization of the Caspian Sea is Inevitable: Cooperation is Needed

Author:
Ilgar Gurbanov
Publication Date:
09-2013
Content Type:
Commentary and Analysis
Institution:
BILGESAM (Wise Men Center for Strategic Studies)
Abstract:
There is a strong linkage between energy and security. It can be a factor both for cooperation and conflicts, namely it can push forward for cooperation between two states, while at the same time can create tension between them. This tendency can be applied to Caspian Sea, which contains one of the largest oil and gas areas of the world. The energy diplomacy has been key factor for the political and economic development of Caspian states. The exploration and transportation of energy resources to world markets has been a central element of their foreign policies, and has enabled them to strengthen their sovereignty.
Topic:
Security, Development, Energy Policy, and Militarization
Political Geography:
Caspian Sea