The political economy of inflation and stabilization in middle-income countries

In a number of middle-income developing countries, the severe inflationary crises of the 1980s coincided with political liberalization and an expansion of the arena of distributive politics. This wave of democratization raises questions that have recurred throughout the post-World War II period. This paper provides a comparative analysis of the politics of inflation and stabilization in seventeen Latin American and Asian countries, paying particular attention to social movements and governments that seek to mobilize the popular sector. The paper reviews the arguments linking political constraints to macroeconomic policy and inflation, especially the role that populism might play in propagating inflation. It examines the inflation histories of three groups of middle-income countries: those that have maintained relatively stable macroeconomic policies over the long-run; those that have periodically experienced severe difficulties, but managed to adjust; and those that experienced recurrent cycles of very high inflation over an extended period. The paper draws more extensively on case studies of particular inflation episodes to examine the conditions under which inflation has been brought down, paying particular attention to the effect of regime type on stabilization efforts.Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Municipal Financial Management,Inflation

U.S. corporate and bank insolvency regimes: an economic comparison and evaluation

In the U.S., the insolvency resolution of most corporations is governed by the federal bankruptcy code and is administered by special bankruptcy courts. Most large corporate bankruptcies are resolved under Chapter 11 reorganization proceedings. However, commercial bank insolvencies are governed by the Federal Deposit Insurance Act and are administered by the FDIC. These two resolution processes--corporate bankruptcy and bank receiverships--differ in a number of significant ways, including the type of proceeding (judicial versus administrative); the rights of managers, stockholders and creditors in the proceedings; the explicit and implicit goals of the resolution; the prioritization of creditors--claims; the costs of administration; and the timeliness of creditor payments. These differences derive from perceptions that "banks are special." This paper elucidates these differences, explores the effectiveness of the procedural differences in achieving the stated goals, and considers the potential economic consequences of the different structures.Bank failures ; Federal Deposit Insurance Corporation

A comparison of U.S. corporate and bank insolvency resolution

In the U.S., the insolvency resolution of most corporations is governed by the federal bankruptcy code and is administered by special bankruptcy courts. Most large corporate bankruptcies are resolved under Chapter 11 reorganization proceedings. However, commercial bank insolvencies are governed by the Federal Deposit Insurance Act and are administered by the FDIC. These two resolution processes—corporate bankruptcy and bank receiverships—differ in a number of significant ways, including the type of proceeding (judicial versus administrative); the rights of managers, stockholders, and creditors in the proceedings; the explicit and implicit goals of the resolution; the prioritization of creditors’ claims; the costs of administration; and the timeliness of creditor payments. This article elucidates these differences and explores the effectiveness of the procedural differences in achieving the stated goals.Bankruptcy ; Bank failures

Derivatives and systemic risk: netting, collateral, and closeout

In the U.S., as in most countries with well-developed securities markets, derivative securities enjoy special protections under insolvency resolution laws. Most creditors are “stayed” from enforcing their rights while a firm is in bankruptcy. However, many derivatives contracts are exempt from these stays. Furthermore, derivatives enjoy netting and close-out, or termination, privileges which are not always available to most other creditors. The primary argument used to motivate passage of legislation granting these extraordinary protections is that derivatives markets are a major source of systemic risk in financial markets and that netting and close- out reduce this risk. ; To date, these assertions have not been subjected to rigorous economic scrutiny. This paper critically reexamines this hypothesis. These relationships are more complex than often perceived. We conclude that it is not clear whether netting, collateral, and/or close-out lead to reduced systemic risk, once the impact of these protections on the size and structure of the derivatives market has been taken into account.Derivative securities ; Financial markets

Bank procyclicality, credit crunches, and asymmetric monetary policy effects: a unifying model

Much concern has recently been expressed that both large, procyclical changes in bank assets and "credit crunches" caused by bank reluctance to expand loans during recessions contribute to economic instability. These effects are difficult to explain using the standard textbook model of deposit expansion in which deposits are constrained only by reserve requirements. However, these effects follow easily if the model is expanded to include a second, capital constraint.Bank assets ; Monetary policy

The Effects of Linalool and Peppermint Aroma on Cognitive Performance

What if there was a way for people to perform better on tests, make less mistakes, and work more efficiently? Previous research has suggested that a person can achieve enhanced cognition and task performance simply by breathing the scents of certain natural substances. The amount of supporting research to back up these claims, however, is limited. This project seeks to understand the question of how peppermint and linalool (lavender) aromas affect cognitive performance. Its purpose is to provide a clearer understanding of the psychological and psychopharmacological effects (specifically regarding performance), if any, that these aromas can produce in human subjects. Subjects were evaluated in three separate conditions (no aroma, linalool aroma, and peppermint aroma) using the PEBL (Psychology Experiment Building Language) Math Processing Task, which involves answering simple math problems as quickly and accurately as possible. Results show that subjects exposed to the linalool aroma showed increased accuracy compared to their respective no aroma conditions, however, there was no effect on response time. Peppermint aroma did not have an effect on accuracy or response times compared to the respective no aroma conditions. These findings could have widespread application, including the ability to potentially increase accuracy or general task performance for people exposed to linalool. In addition, this study may open the door for further research on aromas to determine what other effects on humans or uses they could have.URO Summer Research FellowshipHonors/Scholars Grant FundingNo embargoAcademic Major: Psycholog