Frobenius Modules and Hodge Asymptotics

We exhibit a direct correspondence between the potential defining the H^{1,1} small quantum module structure on the cohomology of a Calabi-Yau manifold and the asymptotic data of the A-model variation of Hodge structure. This is done in the abstract context of polarized variations of Hodge structure and Frobenius modules.Comment: Updated bibliography. Final version published in Commun. Math. Phy

Asymptotic Hodge theory and quantum products

Assuming suitable convergence properties for the Gromov-Witten potential of a Calabi-Yau manifold $X$ one may construct a polarized variation of Hodge structure over the complexified K\"ahler cone of $X$. In this paper we show that, in the case of fourfolds, there is a correspondence between ``quantum potentials'' and polarized variations of Hodge structures that degenerate to a maximally unipotent boundary point. Under this correspondence, the WDVV equations are seen to be equivalent to the Griffiths' trasversality property of a variation of Hodge structure.Comment: References and comments added. To appear in "Advances in Algebraic Geometry Motivated by Physics", Ed. E. Previatto, Contemporary Mathematic

An Appreciative Model of Schumpeterian Evolution

Schumpeter persistently sought to reconcile innovation with general equilibrium to explain economic evolution. In essence, he was interested in innovatory discontinuities that upset equilibrium and generate a transitional dynamics converging to a different state of technology. There are two central approaches to the analysis of economic evolution which revolve around the Schumpeterian vision: the evolutionary approach as originated in the landmark book by Nelson and Winter An Evolutionary Theory of Economic Change and the neoclassical approach emerging from Romer’s seminal paper “Endogenous Technological Change” Neither of these approaches is able to explain economic evolution in an economy where both general equilibrium and innovatory discontinuities can happen. In this paper I formalize the notion of innovatory discontinuity using the concept of ‘ideas production function’ and present an appreciative model of economic evolution involving equilibrium, innovation and innovatory discontinuities. This (hybrid) model sheds some light on the answer to the question: is economic evolution continuous or discontinuous?General equilibrium, economic evolution, neoclassical approach, evolutionary economics, mega-invention, innovatory discontinuities, Schumpeterian view

Costs and benefits of debt and debt service reduction

The author evaluates the costs and benefits of debt and debt service reduction (DDSR) from the point of view of five countries that have concluded Brady deals: Costa Rica, Mexico, the Philippines, Uruguay, and Venezuela. He concludes that, contrary to widely held views, commercial banks have probably benefited from the operations. Commercial bank participation in DDSR is voluntary, so direct financial savings to the country are probably negative at present values. The benefit from DDSR is not that debt is bought at"bargain prices"at the expense of commercial banks. It appears difficult to justify a DDSR operation on purely financial grounds. A more realistic way to look at a DDSR operation is to view it as a"project"that involves a certain financial cost. The return on such a project is how the DDSR operation improves the macroeconomy, or contributes to development. The main purpose of DDSR is to establish a more efficient arrangement between debtor countries and commercial banks, leading to improved conditions for development. A DDSR operation that does not help development is costly and should not be undertaken. The impact of DDSR on development is usually measured by the increase in the growth rate of GDP, but it is too soon to measure that for these five countries. A suitable alternative is to look at the change in investment patterns. A strong policy framework is needed if debt and debt service reduction are to significantly improve development. In Mexico and, to a lesser extent, Venezuela, improved and sustained strong adjustment policies have generated the greatest development benefits. Gains have been less in smaller countries where policies were not as supportive. The author concludes that for a country to benefit from DDSR, it needs significant indirect benefits (such as increased domestic and foreign savings). Direct benefits are likely to be negative because of the commercial banks'financial gains and because DDSR operations are frontloaded. DDSR operations cannot be justified solely by direct benefits and savings in cash flow.Strategic Debt Management,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies,Financial Intermediation

The new wave of private capital inflows : push or pull?

Widespread private capital inflows to middle-income countries have surged over the past three years. At the same time, Brady-type debt reduction operations and domestic policy reform took place, indicators of country creditworthiness improved dramatically, and international interest rates plummeted. Which factors most fully explain the wave of capital inflows? How sustainable is it? Some see this new wave of voluntary capital inflows as being mostly"pulled"by attractive domestic conditions, which open new and profitable investment opportunities in the domestic economy and improve country creditworthiness. Under this interpretation, if successful domestic policies are maintained, capital inflows will be sustained. Others see these inflows as being mostly"pushed"by conditions (especially low interest rates) in industrial countries. Under this interpretation, capital inflows would diminish and possibly turn to outflows if international real interest rates returned to the higher levels of the 1980s. The author presents an analytical model of international portfolio investment in developing countries based on non-arbitrage conditions between external returns and domestic returns adjusted by country risk. The author uses the model to explain why the new wave of private capital inflows is mostly a middle-income country phenomenon. To analyze the issue of private capital inflows, he applies the model of data for a representative panel of middle-income countries. The main empirical result is that (except in Argentina, the Republic of Korea, and notably, Mexico), the surge of capital inflows appears to be driven more by low returns in industrial countries than by domestic factors. So recent levels of capital inflows would be unsustainable if global interest rates returned soon to higher levels and cautious policies should be followed. Two other important conclusions are obtained. First, depressed returns in industrial countries caused the improved creditworthiness in indebted countries through their effects on discount rates. Country creditworthiness was an important transmission mechanism for external shocks and is the key to reconciling the push and pull interpretations of market data. Second, a soft landing appears feasible. Stock adjustment does not appear to be a significant component of the adjustment mechanism manifested in the surge of capital inflows. In other words, the evidence so far suggests that gradual increase in international interest rates would result in less capital inflow, or moderate capital outflows in some countries, rather than massive capital outflows that quickly bring down the stock of foreign liabilities. By and large, if there are capital outflows, they are unlikely to match past inflows unless the reversal in external conditions coincides with a worsening of domestic conditions.Economic Theory&Research,International Terrorism&Counterterrorism,Macroeconomic Management,Environmental Economics&Policies,Banks&Banking Reform

The surge in capital inflows to developing countries : prospects and policy response

After being excluded from world capital markets during the debt crisis, many developing countries have experienced large capital inflows in the past five years. The challenges these inflows pose for domestice policy have generated a substantial literature. The authors review and extend that literature. They characterize the new inflows, assess their causes and the likelihood of sustainability, analyze the policy issues they raise, and evaluate the possible policy responses. Their conclusions tie desirable policy responses to characteristics of both the flows themselves and to those of the recipient economy. Regarding the forces driving the current episode, they conclude that generally, the role of foreign interest rates as a"push"factor driving capital inflows and determining their magnitude has been well-established. On the other hand, country creditworthiness has helped determine both the timing and destination of the new capital flows. Even if creditworthiness is maintained, the early level of inflows is unlikely to be sustained. The pace of reduction in flows to countries that have been receiving them since the early 1990s depends on the path of foreign interest rates and the role of stock adjustment. But a loss of creditworthiness caused by a deterioration in domestic policy would stop inflows quickly and, depending on the circumstances, inflows may be replaced by substantial outflows and an outright balance of payments crisis.What are the implications for policy in recipient countries? Briefly, the receipt of capital inflows may strengthen the case for removing macroeconomic distortions, either because such inflows aggravate the cost ofsuch distortions or because they ease the constraints that originally motivated their adoption. While direct intervention may not be feasible (because controls may be easily evaded), controls may sometimes be a second-best policy. To the extent that capital inflows are permitted to materialize, the desirability of foreign exhcange intervention depends on what is required for macroeconomic stability. Sterilized foreign exchange intervention to prevent overstimulation of demand with a fixed exchange rate may not be feasible or effective. A commensurate reduction in the money multiplier, achieved by increasing reserve requirements, may also have limited effects. The effectiveness of both measures depends on the structure of the domestic financial system. If domestic monetary expansion is not avoided, or if an expansionary financial stimulus is transmitted outside the banking system, the stabilization of total demand will require fiscal contraction.International Terrorism&Counterterrorism,Capital Markets and Capital Flows,Economic Theory&Research,Fiscal&Monetary Policy,Banks&Banking Reform,Economic Theory&Research,Macroeconomic Management,Banks&Banking Reform,Environmental Economics&Policies,International Terrorism&Counterterrorism