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56361. Inflation Targeting and Nominal Income Growth Targeting: When and Why Are They Suboptimal?

Author:
Dale W. Henderson and Jinill Kim
Publication Date:
02-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We derive optimal monetary stabilization rules and compare them to simple rules under both full and partial information. The nominal interest rate is the instrument of monetary policy. Special attention is devoted to inflation targeting and nominal-income-growth targeting. We use an optimizing-agent model of a closed economy which features monopolistic competition in both product and labor markets. A stabilization problem exists because there are one-period nominal contracts, either for wages alone or for both wages and prices, and three shocks that are unknown when contracts are signed. In order to highlight basic theoretical results, we deliberately keep our model simple enough that we can obtain exact solutions. Optimal rules maximize the expected utility of the representative agent subject to the information set of the policymaker. A key result, possibly surprising at first, is that even with monopolistic competition, the optimal full information policy makes the economy mimic the hypothetical equilibrium with flexible prices and wages. We explain why strict versions of inflation targeting, nominal income growth targeting, and other such simple rules are suboptimal under both full and partial information and derive flexible versions that are optimal under certain partial information assumptions. Nominal income growth targeting dominates inflation targeting for plausible parameter values.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States

56362. On the Sequencing of Projects, Reputation Building, and Relationship Finance

Author:
David C. Smith, Steven Ongena, and Dominik Egli
Publication Date:
02-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We study the decision an entrepreneur faces in financing multiple projects and show that relationship financing will arise endogenously in an environment where strategic defaults are likely, even when firms have access to arm's-length financing. Relationship financing allows an entrepreneur to build a private reputation for repayment that reduces the cost of financing. However, in an environment where the risk of strategic default is low, the benefits from reputation building are outweighed by holdup rents extractable by the incumbent lender. Entrepreneurs then choose to finance projects from single or multiple arm's-length lenders.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

56363. Determinants and Repercussions of the Composition of Capital Inflows

Author:
Mark Carlson and Leonardo Hernandez
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The Mexican, Asian, and Russian crises of the mid- and late 1990s have renewed the interest among policymakers in the determinants and effects of private capital flows. This paper analyzes whether policies can affect the composition of capital inflows and whether different compositions aggravate crises. We find that, while fundamentals matter, capital controls can affect the mix of capital inflows that countries receive. We find that during the Asian crisis countries with more Yen denominated debt faired worse, while during the Mexican crisis larger short-term debt stocks increased the severity of the crisis.
Topic:
Conflict Resolution and Economics
Political Geography:
Russia, Asia, and North America

56364. Department of Defense Dictionary of Military and Associated Terms

Publication Date:
04-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The Department of Defense Dictionary of Military and Associated Terms (short title: Joint Pub 1-02 or JP 1-02) sets forth standard US military and associated terminology to encompass the joint activity of the Armed Forces of the United States in both US joint and allied joint operations, as well as to encompass the Department of Defense (DOD) as a whole. These military and associated terms, together with their definitions, constitute approved DOD terminology for general use by all components of the Department of Defense. The Secretary of Defense, by DOD Directive 5025.12, 23 August 1989, Standardization of Military and Associated Terminology, has directed the use of JP 1-02 throughout the Department of Defense to ensure standardization of military and associated terminology.
Topic:
Security and Defense Policy
Political Geography:
United States

56365. Cities as Economic Development Tools

Author:
Nigel Harris
Publication Date:
12-2002
Content Type:
Policy Brief
Institution:
The Wilson Center
Abstract:
Increasing globalization – the economic integration of national economies – and the resulting governmental decentralization have obliged cities in many countries to take seriously the economy of the city. On the other hand, unless cities can be made to work, national economic growth is seriously impeded. Hence, city managers become increasingly important in economic management. The old fatalism – that economic growth is a matter exclusively for national governments – comes under threat.
Topic:
Civil Society, Development, Government, and Politics

56366. Against the Feminization of Policy

Author:
Ananya Roy
Publication Date:
11-2002
Content Type:
Policy Brief
Institution:
The Wilson Center
Abstract:
In recent times, there has been avid policy interest in paradigms of enablement. From declarations that the poor are “heroic entrepreneurs” (de Soto 2000) to recommendations on how to capitalize on the social capital of poverty, there is a loud call to help the poor help themselves. I want to focus on a key characteristic of the enablement framework: the attention to women. The policy investment in poor women now spans a range of institutional actors – a kinder and gentler World Bank, the UN shelter debates, and the NGOs that crowd the stage of development. Microcredit programs targeting women, mothers' clubs in squatter settlements, female farming cooperatives have become standard fare. One could say that women have become the currency of this latest round of development, the “instrument,” as Jackson (1999) puts it, of enablement. Drawing upon a rich corpus of feminist research, I want to critically examine the implications of this feminization of policy.
Topic:
Foreign Policy, Civil Society, Development, and Politics

56367. La calidad del ciudadano. Past and Present. The Nature of Citizenship in Mexico and the United States- 1776-1912

Author:
Erika Pani
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
The Wilson Center
Abstract:
Mexico's transition to democratic rule has triggered much debate about the legacies of the past under which Mexicans must labor. Mexico is seen as emerging from a monolithic, murky and only rarely interrupted authoritarian past, from the Aztec tlatoanis to the PRI. Mexican “political culture” is seen as both the underlying principle and the creature of this historical experience. Some characterize Mexicans as lacking democratic values, with no electoral culture and with their families structured along patriarchic and authoritarian lines. Ironically, this approach, which tries to explain the present by understanding the past, is blatantly unhistorical. It speaks of static, eternal core values, of an unchanging México Profundo that has supposedly lurked inside every Mexican through the ages regardless of class or regional origin. Thus, writes one scholar, “behind an image of modernity and values, lies hidden the arithmetic relationship of dominion and subordination.” The trappings of a modern society barely cover one that is deeply traditional, whose real values and practices are rooted in “the ancient Mesoamerican civilizations.”
Topic:
International Relations, Security, and Regional Cooperation
Political Geography:
United States and Mexico

56368. Mobility in Bulgaria and the European Union: Brain Drain, Bogus Asylum Seekers, Replacement Migration, and Fertility

Author:
Kristen Ghodsee
Publication Date:
11-2002
Content Type:
Working Paper
Institution:
The Wilson Center
Abstract:
The collapse of communism in 1989 in Bulgaria was initially uneventful. Todor Zhivkov, the longest ruling leader in the Eastern Bloc, simply resigned. Democratic elections were held. Bulgaria had none of the wide-scale violence and chaos that characterized the transitions of the other Balkan states, most notably Romania and Yugoslavia. The effects of the social, political, and economic changes in Bulgaria, however, were just as devastating. The communists renamed themselves “socialists” and won the elections as the Bulgarian economy began a drastic contraction from which it has never recovered. The standard of living for ordinary Bulgarians dropped severely and new criminal elements appeared in society for the first time. The so-called “robber Barons” of Bulgaria pillaged what was left of the state's assets and set themselves up as the country's new elite. Meanwhile, the nearby wars and embargoes in the former Yugoslav republics gave the new Bulgarian Mafia ample opportunities to solidify their positions by smuggling arms and fuel into neighboring Yugoslavia.
Topic:
Government, International Organization, Migration, and Politics
Political Geography:
Europe, Yugoslavia, and Bulgaria

56369. U.S. Policy Toward the Former Yugoslavia

Author:
Steven E. Meyer
Publication Date:
08-2002
Content Type:
Working Paper
Institution:
The Wilson Center
Abstract:
As long as the Cold War framed the international arena, relations between the United States and Yugoslavia were—for the most part—fairly clear and predictable. Both sides played their assigned roles well in the larger East-West drama. For the U.S., Yugoslavia—after Tito and Stalin split in 1948—was the useful, even reliable, strategically-placed, communist antagonist to the Soviet Union. Certainly, Washington complained at times about Yugoslavia's preference for nonalignment and lamented the fact that it was not part of the Western alliance. The fact that Yugoslavia was indeed a communist state that Moscow could not control, however, more than compensated for these “short comings.” As a reward, the U.S. courted Tito, provided economic aid, and paid virtually no attention to how he ran the country—even his brutal rise to power after World War II was of little consequence.
Topic:
International Relations, Foreign Policy, Cold War, and Politics
Political Geography:
United States, Europe, Washington, Soviet Union, and Yugoslavia

56370. NATO as a Factor of Security Community Building: Enlargement and Democratization in Central and Eastern Europe

Author:
Corneliu Bjola
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
The Wilson Center
Abstract:
This analysis is primarily concerned with examining the building blocks and mechanisms through which NATO extends its institutional and normative influence and contributes (or not) to reducing chances for military conflict and political tension in Central and Eastern Europe (CEE) by integrating the region into the Western security community. In terms of political stakes, the prospects of forming a CEE security community would be seriously undermined if NATO enlargement and partnership programs were perceived as facilitating the evolution of a regional arms race, driven by aggressive foreign policies and sponsored by widespread nationalism and regional mistrust. The formation of the CEE security community would be more likely if the institutional and normative adjustments induced by NATO's cooperative security arrangements were viewed as promoting the democratic development of the political-military structures driven by non-nationalist and region-wide, cooperative attitudes.
Topic:
International Relations, Security, NATO, and Democratization
Political Geography:
Europe