The Relation Between Inflation and Export Prices: An Aggregate Study

One of the alleged costs of inflation is said to be the loss of competitiveness in international markets if the rate of change of proces is higher in the domestic country than in the rest of the world. While inflation is measured by changes in the consumer price index, wholesale price index, or the implicit deflator of GNP, competitiveness in this context is determined by changes in the export price index in one country in relation to price changes in other countries.

The Effectiveness of Stabilization Policy in a Small Open Economy

A small open economy is forced to operate in a constrained policy environment. Although for some products even a small country may have some monopoly power, in the aggregate these countries approximate more closely the behaviour of price takers than price makers. It is to economies such as these, and not larger or closed economies, that the analysis of this paper is devoted. The extremity of the assumptions is such as to make the analysis totally inapplicable to countries such as the United States. The purpose of the paper, then, is to investigate the characteristics peculiar to a small open economy and to incorporate them in a model which will allow us to discuss the effectiveness of stabilization policy in this constrained environment. In particular, it is proposed to re-examine Mundell's conclusions about monetary and fiscal policy under fixed and flexible exchange rates and to show that, under flexible exchange rates, an optimum policy combination exists that eliminates the trade-off between inflation and unemployment. As is common in these stabilization policy models, growth in factor supplies, and therefore output, is assumed not to exist.

The Inflationary Process in Open Economies

While the concept of "imported inflation" and its relevance for open economies have received considerable attention in the policy-oriented literature, the theoretical underpinnings of this phenomenon have not been constructed as carefully as might be desirable in view of the controversial nature of the subject. The inflationary process can be transmitted to a country by developments in international capital and money markets or through the interaction of goods markets in one country with those of the rest of the world. The debate concerning the former transmission mechanism involves the difficulties in dichotomizing the balance of payments and the domestic money supply through the sterilization of foreign exchange gains or losses. In this paper, major emphasis will be given to the transmission of the inflationary process through the goods and services markets. Primarily,we are interested in investigating the determinants of the rate of inflation for a small country which, because of its size, is forced to accept certain conditions imposed by the external environment.

The Composition of Official International Reserves

The balance of this paper will take the following form: a hypothesis concerning the portfolio manangement of international reserves will be stated; then, this hypothesis will be tested statistically; finally, a discussion of these results and their meaning for the future will conclude the paper.

Direct Investment In The U.S. Balance Of Payments--A Portfolio Approach

The active control and operation of firms in other countries implied by direct foreign investment has dominated the international investment position of the U.S. vis-a-vis the rest of the world. At the end of 1967, 73% of U.S.long term foreign assets were held in the form of direct investment. On the other side of the coin, 35% of foreign long-term assets held in the U.S. were in this category. It is the purpose of this paper to explain the demand for these direct investment assets, both U.S. investment abroad and foreign investment in the U.S.

Fiscal Transparency, Elections and Public Employment: Evidence from the OECD

There is considerable variation in levels and changes in public employment within and between developed democracies. This article highlights the importance of fiscal transparency in determining changes in public employment. It argues that economic growth increases public employment under low fiscal transparency and that this effect is strongest in years of election. These hypotheses are tested on a panel of 20 OECD countries from 1995 to 2010. The analyses show substantial evidence in favor of the arguments. Fiscal transparency lowers the positive effect of growth on public employment, a relationship, which is most robust in election years

The crisis sensitivity of European countries and regions: stylized facts and spatial heterogeneity

We investigate the impact of the recent global recession on European countries and regions. We first identify the heterogeneous impact of the global recession on individual European countries and regions. We then discuss three classes of explanations for spatial heterogeneity in the severity of the crisis: (i) the extent to which countries are integrated in the global economy via financial and trade linkages, (ii) differences in the institutional framework of countries and (iii) differences in their sectoral composition. We show that especially variation in the sectoral composition contributes to the variation in the effects of the current crisis, both at the country level and at the detailed regional level across Europe. © The Author 2011. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved