Remittance stability, cyclicality and stabilizing impact in developing countries

That remittances are a stable source of external finance seems to have become the received wisdom. In addition, many studies have found remittances to behave counter-cyclically, increasing during crises and times of hardship for the recipient countries. Are remittances reliable macroeconomic stabilizers? To answer this question, the present study examines the stability, cyclicality, and stabilizing impact of remittances in comparison with the same three features for other foreign-exchange inflows, namely foreign direct investment and official development aid. The analysis is performed at the country and regional levels rather than at the aggregate or global level (on which much of the received wisdom rests), because policymakers are concerned with the impact of remittances in their country rather than at the global level. The main findings for 1980-2007 are that in a majority of countries: i) official development aid is more stable than remittances, and remittances are more stable than foreign direct investment; ii) official development aid is counter-cyclical, while remittances are pro-cyclical, although less so than foreign direct investment; and iii) official development aid is stabilizing and remittances are destabilizing, although less so than foreign direct investment. The paper suggests that it is necessary to examine counter-cyclicality separately from the stabilizing impact, as the former does not seem to always imply the latter.Economic Conditions and Volatility,Remittances,Debt Markets,Economic Theory&Research,Emerging Markets

Exchange-Rate Dynamics

This paper discusses the dynamic behavior of exchange rates, focusing both on the exchange rate's response to exogenous shocks and the relation between exchange-rate movements and movements in important endogenous variables such as prices, interest rates, output, and the current account. Aspects of exchange-rate dynamics are studied in a variety of models, some of which are based on postulated supply and demand functions for assets and goods, and some of which are based on explicit individual utility-maximizing problems. Section 1 surveys the terrain. Section 2 explores the simplest model in which the relation among the exchange rate, price levels, and the terms of trade can be addressed -- a flexible-price small-country model in which wealth effects are absent and domestic and foreign goods are imperfect substitutes. Section 3 introduces market frictions so that the role of endogenous output fluctuations can be studied. Both sticky-price models and alternative market-friction models are discussed. Section 4 studies the link between the accumulation of foreign assets and domestic capital and the exchange rate.Section 5 examines deterministic and stochastic models in which individual behavior is derived from an explicit intertemporal optimization problem. Finally, section 6 offers concluding remarks.

Correct and Efficient Antichain Algorithms for Refinement Checking

The notion of refinement plays an important role in software engineering. It is the basis of a stepwise development methodology in which the correctness of a system can be established by proving, or computing, that a system refines its specification. Wang et al. describe algorithms based on antichains for efficiently deciding trace refinement, stable failures refinement and failures-divergences refinement. We identify several issues pertaining to the soundness and performance in these algorithms and propose new, correct, antichain-based algorithms. Using a number of experiments we show that our algorithms outperform the original ones in terms of running time and memory usage. Furthermore, we show that additional run time improvements can be obtained by applying divergence-preserving branching bisimulation minimisation

Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar Period

The interwar period was marked by the end of the classical gold standard regime and new levels of macroeconomic disorder in the world economy. The interwar disorder often is linked to policies inconsistent with the constraint of the open-economy trilemmathe inability of policymakers simultaneously to pursue a fixed exchange rate, open capital markets, and autonomous monetary policy. The first two objectives were linchpins of the pre-1914 order. As increasingly democratic polities faced pressures to engage in domestic macroeconomic management, however, either currency pegs or freedom of capital movements had to yield. This historical analytic narrative is compellingwith significant ramifications for today's world, if truebut empirically controversial. We apply theory and empirics to the interwar data and find strong support for the logic of the trilemma. Thus, an inability to pursue consistent policies in a rapidly changing political and economic environment appears central to an understanding of the interwar crises, and the same constraints still apply today.

The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility

The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff among exchange stability, monetary independence, and capital market openness. Yet the trilemma has not gone without challenge. Some (e.g., Calvo and Reinhart 2001, 2002) argue that under the modern float there could be limited monetary autonomy. Others (e.g., Bordo and Flandreau 2003), that even under the classical gold standard domestic monetary autonomy was considerable. This paper studies the coherence of international interest rates over more than 130 years. The constraints implied by the trilemma are largely borne out by history.

Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar period

The interwar period was marked by the end of the classical gold standard regime and new levels of macroeconomic disorder in the world economy. The interwar disorder often is linked to policies inconsistent with the constraint of the open-economy trilemma the inability of policymakers simultaneously to pursue a fixed exchange rate, open capital markets, and autonomous monetary policy. The first two objectives were linchpins of the pre-1914 order. As increasingly democratic polities faced pressures to engage in domestic macroeconomic management, however, either currency pegs or freedom of capital movements had to yield. This historical analytic narrative is compelling with significant ramifications for today's world, if true but empirically controversial. We apply theory and empirics to the interwar data and find strong support for the logic of the trilemma. Thus, an inability to pursue consistent policies in a rapidly changing political and economic environment appears central to an understanding of the interwar crises, and the same constraints still apply today.

When Thinking Impairs Sleep : Trait, Daytime and Nighttime Repetitive Thinking in Insomnia

We like to thank Dorien van Baar, Lisette van Breen, Rachel Renet, Marlene Stone, Britt van Hest, and Noraly Dekkers for their help with the data acquisition.Peer reviewedPublisher PD

A gauge theory of quantum mechanics

An Abelian gerbe is constructed over classical phase space. The 2-cocycles defining the gerbe are given by Feynman path integrals whose integrands contain the exponential of the Poincare-Cartan form. The U(1) gauge group on the gerbe has a natural interpretation as the invariance group of the Schroedinger equation on phase space.Comment:

Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia

We use plant output and input prices to decompose the profit margin into four parts: productivity, demand shocks, mark-ups and input costs. We find that each of these market fundamentals are important in explaining plant exit. We then use variation across sectors in tariff changes after the Colombian trade reform to assess whether the impact of market fundamentals on plant exit changed with in creased international competition. We find that greater international competition magnifies the impact of productivity, and other market fundamentals, on plant exit. A dynamic simulation that compares the distribution of productivity with and without the trade reform shows that improvements in market selection from trade reform help to weed out the least productive plants and increase average productivity. In addition, we find that trade liberalization increases productivity of incumbent plants and improves the allocation of activity within industries.trade liberalization, plant exit, market selection