Empirical Research on Sovereign Debt and Default

The long history of sovereign debt and the associated enforcement problem have attracted researchers in many fields. In this paper, we survey empirical work by economists, historians, and political scientists. As we review the empirical literature, we emphasize parallel developments in the theory of sovereign debt. One major theme emerges. Although recent research has sought to balance theoretical and empirical considerations, there remains a gap between theories of sovereign debt and the data used to test them. We recommend a number of steps that researchers can take to improve the correspondence between theory and data

PRIVATE SAVINGS IN TRANSITION ECONOMIES: ARE THERE TERMS OF TRADE SHOCKS?

The paper examines the impact of terms of trade shocks on private savings in the transition economies after accounting for the effect of other determinants. Economic agents in the transition economies are subject to tight credit constraints which are more pronounced during bad state of nature. Thus, adverse shocks to commodity prices in the world market can force them to reduce savings by a larger amount than they would otherwise have. Empirical analysis using a dynamic panel model and data from twenty one transition economies confirm that most of the determinants of savings identified in the literature also apply to the transition economies. Favorable movements in both the permanent and transitory components of the terms of trade have a significant positive impact on private savings with transitory movements having a larger impact than the permanent component. This reflects the lack of access to foreign borrowing that many of the transition economies have faced during the last decade. Although the impact of terms of trade shocks are found to be asymmetric, the magnitude of the impact appears to be small. The results are robust for alternative estimators, determinants, and country groupings.http://deepblue.lib.umich.edu/bitstream/2027.42/39958/3/wp572.pd

Crime, Institutions and Sector-Specific FDI in Latin America

In this article, we explore how crime and institutions affect the flow of capital in the form of foreign direct investment (FDI) to Latin American and Caribbean countries in the primary, secondary and tertiary sectors during the 1996-2010 period. We use three different variables related to violent crime: homicides, crime victimization, and an index of organized crime. We find that there is a correlation between the institutional and crime variables, where the significance of institutional variables tends to disappear when the crime variables are added to the model. We find that higher crime victimization and organized crime are associated with lower FDI in the tertiary sector. We do not find that crime affects FDI inflows to Latin America in the primary and secondary sector

Impact of Firm Heterogeneity on Direct and Spillover Effects of FDI: Micro Evidence from Ten Transition Countries

This paper presents a comparative study of the importance of direct technology transfer and spillovers through FDI on a set of ten transition countries, using a common methodology and appropriate methods to account for selection and simultaneity correction. This paper considers by far the largest firm level dataset (more than 90,000 firms) used by any study on the spillover effects of FDI. The main novelty of the paper is the explicit control for various sources of firm heterogeneity when accounting for different effects of FDI on firm perfirmance. Controlling for these variables leads to some interesting results which contrast with the previous empirical work in the field. We find that horizontal spillovers have become increasingly important over the last decade, and they may even become more important than vertical spillovers. Furthfirmore, this work shows that the heterogeneity of firms in tfirms of absorptive capacity, size, productivity and technology levels affect the results. These findings suggest that both direct effects from foreign ownership as well as the spillovers from foreign firms substantially depend on the absorptive capacity and productivity level of individual firms. Only more productive firms and firms with higher absorptive capacities are able to both compete with foreign affiliates in the same sector and benefit from the increased upstream demand for intfirmediates generated by foreign affiliates. In addition, these results show that foreign presence may also affect smaller firms to a larger extent than larger firms, but this impact may be in either direction

Regional development gaps in Argentina: A multidimensional approach to identify the location of policy priorities

Spatial inequalities within Latin American countries have historically attracted the interest ofacademics, policy-makers, and international agencies. This article aims to provide amultidimensional diagnosis of provincial development gaps in Argentina, in order to identifythe location of policy priorities. Therefore, we built a large database, which covers sevendevelopment dimensions, and applied multivariate analysis techniques to overcome someanalytical limitations of previous studies. Results show the stability of provincial developmentgaps between 2003 and 2013 and some heterogeneity within geographic regions. Instead,cluster analysis offers a better classification of Argentine provinces according to theirdevelopment gaps, which can help the government to prioritize the places wheredevelopment policies are strategic.Fil: Niembro, Andrés Alberto. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Patagonia Norte; Argentina. Universidad Nacional de Río Negro; ArgentinaFil: Sarmiento, Jesica Isabel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Patagonia Norte; Argentina. Universidad Nacional de Río Negro; Argentin

Signalling Demand for Foreign Investment: Postsocialist Countries in the Global Bilateral Investment Treaties Network

A unique dataset on bilateral investment treaties provides a novel source of evidence on the link between neoliberal globalisation and market transition. We argue that postsocialist countries of Europe and Eurasia, more than other developing regions in the world, signed such treaties to signal demand for foreign investment in the spirit of neoliberalism. We calculated the density of the whole BIT network since its inception in 1959 to 2009, and density and centrality of different regional blocks within it, and found strong support for our argument. Yet, even if bilateral investment treaties are designed to promote foreign direct investment, dynamic panel regression models show that signing them does not automatically translate into foreign direct investment inflows for postsocialist European and Eurasian countries in the 1990–2010 period

Targeting the Structural Balance

This paper discusses whether a country should conduct fiscal policy by targeting a structural (or cyclically adjusted) fiscal balance. The paper is divided into three sections. The first section discusses the concept of cyclically adjusted balance (CAB) and points out practical and conceptual problems related to the interpretation and the measurement of a CAB. The second section discusses the theoretical rationale for having a fiscal rule in general and a rule defined in terms of a cyclically adjusted balance in particular. The third section discusses conceptual and practical problems with adopting fiscal rules and rules that target the structural balance