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Below is the schedule for the Economics Seminar Series for the academic year 2013-2014, along with the abstract for each seminar. A downloadable version of the full schedule can be found here.
On the Determinants of Fiscal Consolidation Success: A Bayesian Approach
The literature on fiscal consolidation points to a variety of fiscal, macroeconomic, and political factors as influential in determining the success of fiscal adjustment attempts. Considering 31 of these potential factors, we analyze their influence on a binary dependent success variable within a Bayesian framework. Based on a set of OECD countries for the 1975-2009 period, our results suggest that three variables, namely, the change in government social spending, monetary stance and the type of government are highly likely to be included in the best model. Accordingly, a decrease in government social spending, accommodating monetary policy and a united government increase the probability of achieving episodes of successful fiscal adjustment.
Sustainability of the Current Account Deficits: An Application with the Turkish Data
Many developing countries have experienced substantial and persistent current account deficits in recent years; this has raised the issue of sustainability since currency crises were often associated with large and persistent current account deficits. With this motivation, after presenting a brief history about balance of payments in Turkey, macroeconomic determinants of the current account deficits in Turkey were investigated by Vector Auto Regression and Auto Regressive Distributed Lag models in lights of the theoretical arguments made about Turkish Economy through making comparisons with Latin American and East Asian countries. Then, sustainability of the current account deficit was analyzed by different empirical techniques associated with solvency and excessiveness concepts. Both the long run relationship between exports and imports together with national cash flow and consumption were analyzed. In order to distinguish between sustainable and unsustainable periods for current account deficits, Markov regime switching model was used thereafter. Finally, sustainability of the current account deficits in Turkey was evaluated according to the macroeconomic fundamentals together with discussing the composition of current account deficit and the way of financing to have insights about the future path of current account balance. Problem about current account deficits were considered as structural for two reasons. First, the deficits were mainly caused by high rate of investments rather than temporary over-consumption decisions. Second, they were caused by foreign trade deficits largely as an outcome of dependence of production and exports on imported intermediate goods. Furthermore, there were negative developments about the way of financing in last years that share of debt instruments in financing has increased against FDI. As a result, it has seen that Turkey would continue to have current account deficits in the next years and sustainability of these deficits has become increasingly difficult.
The Macroeconomics of the Gold Economy in Sudan
Sudan has recently experienced a surge in gold exports, which quickly became the top foreign exchange earner, following the collapse of the oil economy due to the partitioning of the country in 2011. However, the foreign exchange-constrained and severely fiscally-dominated economy prompted the government to assign the role of gold purchasing and exporting the gold to the Central Bank, rather than the Ministry of Finance, nor to private exporters. This paper develops a simple game-theoretic rational expectation macroeconomic model, where the payoffs associated with the strategic behavior of gold's traders' and the objectives of maximizing gold purchases are used to define the central bank's problem. In this context the paper assesses the implications of the bank's policy on inflation and the rate of nominal exchange rate devaluation. We find that the bank's monetary policy is largely influenced by the international gold price, the domestic part of the government's debts and is ineffective in anchoring inflation expectations and also tends to weaken the domestic currency. Our model also allows the derivation of a threshold of gold purchase to money supply ratio, beyond which the rate of inflation becomes higher than the rate of currency devaluation. In turn, this leads to real exchange rate appreciation, to the detriment of agriculture and manufacturing, which further reinforces the country's dependency on the resource rents.
An Empirical Analysis of Demand for Earthquake Insurance in California
It has been known for years that consumers tend to be uninsured against natural disasters. Previous economic research on the topic has stressed the role of high prices and consumer preferences that deviate from expected utility. In particular, a body of research suggests that agents may be biased in their perception of the probabilities of rare events. In this paper, I use detailed data on earthquake hazard in California to estimate a model of demand for earthquake insurance, and use my demand model to test the sensitivity of consumer response to price, probability of loss, and amount of home equity. My results demonstrate that consumers are very insensitive to price, moderately sensitive to loss probability, and strongly sensitive to home equity. I am able to conclude that the pattern of earthquake insurance demand in California can be explained by the combination of consumers with low equity electing to pass earthquake risk along to their bank, and the existence of a moderate bias in perception of earthquake risk. I accordingly conclude that attempts to encourage consumers to purchase insurance, such as consumer education campaigns or changing the consumer's default option from refusal of insurance to acceptance of insurance could significantly raise demand for earthquake insurance but are unlikely to induce full participation.
Can Abuse Deter Future Migration Flows? : The Case of Runaway Filipina Domestic Workers in Qatar
Domestic work is a large and growing employment sector in the global economy. The United Nations - International Labor Organization reported at least 52 million people -mainly women-around the world are domestic workers. In the Middle East, female domestic workers constitute 1.5 million, largely employed in the Gulf Cooperation Council (GCC) region. While numerous small-scale qualitative studies have extensively examined the ongoing labor abuses and struggles of domestic workers and their legal and social issues, few studies have empirically examined the roles and impacts of abuse on runaway domestic workers' long-term migration plans. Drawing from field-based data collection between 2012 and 2013 in Qatar, we analyzed the demographic profile, labor conditions, contractual violations, and long-term migration plans of runaway Filipina domestic workers in Qatar. Given the highly anticipated events like the First World Cup Qatar 2022 and the Expo 2020, these particular findings are critically important because they have development and immigration policy implications both for the GCC and major labor-sending countries in the long-run.
This article evaluates the contribution of James M. Buchanan's theory of clubs. At the outset, the article distinguishes club goods from pure public goods. Next, the article distills the basic mathematical structure of Buchanan's treatment of clubs. This is followed by some key variants of Buchanan clubs. More general formulations of club theory are also addressed. To demonstrate the wide-ranging importance of Buchanan clubs, the article indicates varied applications of club theory. The article's message is that club theory remains highly relevant today.
Does Globalization Mitigate the Adverse Effects of Terrorism on Output and Growth?
Do open developing nations counter the growth-limiting effects of terrorism more effectively than closed developing nations? We analyze this question using data on 120 developing countries over 1976-2008. The findings suggest that while all types of terrorism suppress output and growth, globalization alleviates this problem. We also identify the critical values of the globalization index where the negative effects of both domestic and transnational terrorism are completely offset by the positive effects of greater openness. The results thus help us understand why the economic consequences of terrorism vary across nations and hold important policy implications.
Attitudes of Students in the GCC towards the Arab Spring: A Case Study of Students in the UAE
In this study we examine the attitudes of students at an institution of higher education in the Gulf region toward the new developments in the Arab world, mainly the so-called Arab Spring. Gulf is one of the most diverse regions of the world, making such research quite interesting as we examine how these attitudes vary with students' characteristics such as demographics and migration history. There are Arab and non-Arab students at institutions of higher education in the Gulf. Some of Arabs hail from the sister countries in the fold of the Gulf Cooperation Council (GCC) group whereas the others come from all corners of the Arab world. Non-Arabs, too, represent a large diversity of nationalities in the region, and therefore at schools. We conduct our research via a survey carried out at the American University of Sharjah, UAE. As the MENA region is home to one of the youngest populations in the world it is paramount to gauge the youth's views and aspirations about the region they are in.
Human Development in the Middle East and North Africa Region: A Comparative Analysis
The MENA region has performed less well than most world regions in terms of economic growth in the last half century or so. A common impression, attributable in part to the well-known Arab Human Development Report issued by the UNDP in 2002, is that the region's performance has also lagged in the area of human development (education and health attainments). In my presentation I will discuss standard metrics of human development and show how the region has fared in comparative terms since 1960. I will also use a simple econometric model to assess the performance of individual countries. This model controls for initial conditions and for public spending in the social sectors. My analysis shows that, contrary to the common impression and despite weak economic growth, the region performed better than comparators as measured by some widely used metrics of human development.
Taylor Rules for Sweden's Monetary Policy Committee
We estimate Taylor rules for Sweden's central bank, the Riksbank, covering the period from May 2000 through December 2012. Swedenis interesting because of the transparency of its monetary policy deliberations and because of its unusual experience in the recent recession. Sweden lapsed into a severe recession in 2008 but, unlike other countries, had a rapid and robust recovery. Prior to the recession, the Riksbank's monetary policy appears to have been highly inertial. However, the policy response to both the recession and the recovery in Sweden was quick and substantial, exhibiting less inertia than would have been predicted on the basis of pre-recession Taylor rule estimates. A notable feature of our econometric work is the use of a dynamic Tobit specification to account for the lower bound on nominal interest rates encountered during the recession.
The RMB Debate: Empirical Analysis on the Effects of Exchange Rate Shocks in China and Japan
For a better understanding of the ongoing debates on the RMB, this paper investigates the effects of exchange rate shocks on output and the current account for China and Japan. We use structural vector auto-regression models and find that yen appr eciation reduces current account surpluses while having no strong effect on output in Japan. RMB appreciat ion, on the other hand, has insignificant effect on the current account, although it tends to reduce output in China. For China, dollar pricing with vertical trade integrat ion seems responsible for the insignificant effect on the current account.
The Structure and Duration of Unemployment in Egypt
Using data from the 2012 round of the Egyptian Labor Market Panel Survey (ELMPS), I construct a cross-section of unemployment spells, and analyze the determinants of the probability of exiting unemployment, conditional on individual and household characteristics, as well as local labor market conditions. Non-parametric and parametric estimates by gender and age group (youth versus older workers) are reported.
Greenhouse Gas Emissions and Obesity
Recent scholarly inquiries contend that obesity contributes to greenhouse gas emissions. However, the evidence presented has been largely speculative. Using U.S. state-level panel data over the 2000-2009 period, we assess the relationship between greenhouse gas emissions and obesity. We find that, net of other factors, U.S. states with higher obesity rates are associated with higher CO2 emissions. We also find evidence supporting the contention that the higher the obesity rate, the larger the potential impact of driving vehicles on CO2 emissions and the impact of farming (as a proxy for fertilizer use) on N2O emissions. Given the significant environmental harm of CO2 and N2O, mitigating their emissions requires a joint effort between policymakers, public health officials, and the agricultural sector in pursuing remedial actions to reverse the current obesity trend, promote the efficient application of fertilizers, and move towards inhibiting the use of nitrogen-based fertilizers.
Power Laws in Texas Oil and Natural Gas Production
This paper shows that the distribution of cumulative oil and gas recovery in Texas is best described by a power-law distribution, with exponent approximately equal to 1 for oil production, and 1.3 for gas production. The goodness of fit of the hypothesized power law is verified with regression-based and likelihood ratio tests. Results are significant because they show that production data are heavy tailed, that empirical variance estimates do not converge, and that 1% of oil leases are responsible for 83% of cumulative recovery.
Industrial Similarity, Education, and Migration
Finding a new job or a better one is the most important motivation and concern of migrants. The literature on the job matching and search indicate that experience strongly influence the type of jobs and how quickly the next job can be acquired. This alone points to the higher tendency of migrants finding a job in the same industry. Furthermore, this tendency is more pronounced for the better educated migrants (with high-skilled jobs) as the importance of on-the-job experience are greater on finding a new job and better match in the destination. Thus in this paper, we maintain that the similarity of the industrial composition of the origin and potential destination improves the job prospect of the potential migrants and therefore increases the migration flow all other things being equal. In addition, the influence of the industrial similarity on migration flow increases as the education attainment at the origin increases. We test these hypotheses using the detailed U.S. County-to-County migration data.
The Consequences of Displacement Camps
One of the difficulties in analysing the long-term impacts of having ever lived in a displacement camp is the possibility of a self-selection process into displacement and into a specific displacement camp. This paper looks at a policy which forced households to move into and stay in a specific camp. During the mid 1990s and early 2000s an estimated 800,000 people were forced out of their communities by the Burundian army and placed into camps, a policy known as "regroupment". Results suggest that about a decade after the end of the regroupment policy, those households that experienced regroupment are less likely to own livestock and the livestock they own is worth less. Those households with regroupment experience are also less likely to have crop and livestock production for subsistence as their main income generating activity, and more likely to have waged employment as their main economic activity.
Industry Concentration, Distance Decay, and Knowledge Spillovers: Following the Patent Paper Trail
This paper investigates the hypothesis that knowledge flows are stronger where industries are spatially concentrated. At the same time, we take a fresh look at the relationship between the friction of distance and the transmission of knowledge. Our unique database combines U.S. county-level patent citations with county-level establishment and employment data. To test the influence of distance decay and industry concentration on knowledge flows we estimate a cited-citing patent gravity model. This empirical approach implements a Poisson pseudo-weighted-maximum-likelihood estimator with high-dimensional fixed effects that controls for multiple sources of observed and non-observed heterogeneity. The results confirm the negative role of distance discovered in Jaffe, Trajtenberg & Hendersons (1993) pioneering work. A major new ...finding is that patent citations correlate positively with industry concentration, holding constant the proximity from the origin of the patent. This result shows that industry concentration can partially offset the adverse effect of distance on knowledge transmission.