The effects of regime-switching uncertainty on irreversible investment decisions

This paper focuses on how uncertainty about the sustainability of reform policies could affect the irreversible investment decisions of a tradable sector firm. Demand, costs and productivity are stochastic and are correlated with real exchange rate trends for the firm producing a tradable good. The firm's investment decisions are influenced by the variability of these business conditions processes, as well as by uncertainty about the timing of a large change in reform policies that dramatically alters the trend growth rates of these processes. Findings are that a firm that expects an unfavourable regime change is more hesitant to invest, reduces investment more in the face of ongoing variability of business conditions, and has a smaller investment response to favourable current trends. Ghana provides one example of a country where in the early stages of the Economic Recovery Program, entrepreneurs were uncertain about whether reform policies would be maintained.

Are Currency Crises Predictable? A Test

This paper evaluates three models for predicting currency crises that were proposed before 1997. The idea is to answer the question: if we had been using these models in late 1996, how well armed would we have been to predict the Asian crisis? The results are mixed. Two of the models fail to provide useful forecasts. One model provides forecasts that are somewhat informative though still not reliable. Plausible modifications to this model improve its performance, providing some hope that future models may do better. This exercise suggests, though, that while forecasting models may help indicate vulnerability to crisis, the predictive power of even the best of them may be limited. Copyright 1999, International Monetary Fund

Flight capital as a portfolio choice

The authors examine flight capital in the context of portfolio choice. They estimate the stock of flight capital held abroad and compare it with the stock of real (nonfinancial) capital held within each country. For 51 countries they construct estimates (as of 1990) of private domestic capital and flight capital - which combined add up to domestic wealth. There are large regional differences in the proportion of private wealth that is held abroad, ranging from 3 percent in South Asia to 39 percent in Africa. They explain differences in portfolio choice in terms of the capital to labor ratio, indebtedness, exchange rate distortions, and risk ratings - all proxies for differences in the risk-adjusted rate of return on capital. They then apply the results to four policy questions in which private portfolio choices are potentially important: the effect of the East Asian crisis on domestic capital outflows; spillovers; the effect of HIPC debt relief on capital repatriation; and why Africa has so much of its private wealth outside the continent. Their conclusions: 1) The four most severely affected East Asian countries will eventually lose about $250 billion in domestic wealth as a result of the deterioration in risk between March 1997 and September 1998. 2) They found some support for a spillover model. 3) The effect of the HIPC debt relief initiative on capital repatriation will vary massively between HIPC-eligible countries. 4) Africa has by far the lowest capital per worker, which makes massive capital flight from Africa all the more distinctive. Three variables explain capital flight in Africa: exchange rate overvaluation, adverse investor risk ratings, and high indebtedness.Capital Markets and Capital Flows,Economic Theory&Research,International Terrorism&Counterterrorism,Fiscal&Monetary Policy,Banks&Banking Reform,International Terrorism&Counterterrorism,Banks&Banking Reform,Settlement of Investment Disputes,Banking Law,Economic Theory&Research

Assessing Early Warning Systems: How Have They Worked in Practice?

Since 1999, IMF staff have been tracking several early warning system (EWS) models of currency crisis. The results have been mixed. One of the long-horizon models has performed well relative to pure guesswork and to available non-model-based forecasts, such as agency ratings and private analysts' currency crisis risk scores. The data do not speak clearly on the other long-horizon EWS model. The two short-horizon private sector models generally performed poorly. Copyright 2005, International Monetary Fund

Serious Mental Illness and the Family: How Can Mental Health Professionals Help?

When a loved one is diagnosed with serious mental illness (Schizophrenia, Bipolar Disorder, Schizoaffective Disorder, or Major Depression) family members are faced with new challenges. The family must provide support, act as an advocate with treatment providers, tolerate unpredictable and unusual behaviors, and, in some cases, involve the legal system to achieve inpatient hospitalization or mandate treatment. The family must also grieve for the losses caused by the illness: loss of goals and dreams, loss of abilities, loss of health. Unfortunately, the family must also cope with the stigma of mental illness. Despite evidence to the contrary, our society continues to blame persons with serious mental illness and their families for the illness, and stigma makes both treatment and recovery more difficult

From Failing to Effective: A Case Study of Transformational Leadership and Teaching at a Township High School in Durban, South Africa

Research has documented what leadership qualities are necessary to improve an underperforming disadvantaged school in South Africa. This research has called for further study of effective township schools in order to understand what makes them succeed. This research project will offer a case study of one such school’s transformation from low to high quality. Menzi High School, an entirely African, under-resourced township school in Umlazi, has achieved extraordinarily high matric pass rates despite the fact that the majority of learners live in informal settlements. The school’s success is due to the strong leadership of a principal who has led the school for the past twenty years. By enabling a complete shift in the school’s ‘culture’ and pedagogy in order to foster high achievement, hard working and commitment to learning, he brought the school’s matric pass rate from 26% to 92% in eight years. This ethnographic case study documents that process and identifies the key steps taken by Mshololo as he transformed Menzi from a failing to an effective school. While most previous studies researching school quality limit their fieldwork to either school leadership or teachers and compare multiple schools, this case study is unique in that it integrates the perspectives of leadership, teachers and learners and details the experience of one specific school in depth. The study outlines the strategies that enabled Menzi’s improvement, including learner-centered pedagogy, effective time management and a relentless effort to improve teacher quality. The school’s success is then placed within the context of education reform in South Africa, to document the case of one effective township school, its strongwilled principal and their relationship with the Department of Education

An Argument for Akrasia

The concept of akrasia is the idea that one could consciously act against one’s own best interests. Socrates argues in Protagoras that akrasia is impossible against the replies of his interlocutors and presents a strong argument for why no one truly acts against their own interests. Nonetheless, it is intuitive for most people that one can act against one’s own interests if they are tempted strongly enough. In this essay, Socrates’ argument is challenged in favor of this intuition, and a possible case for akrasia is presented