Optimal Seigniorage in Developing Countries: An Empirical Investigation

This paper investigates the predictions of the theory of optimal seigniorage in developing countries over the period 1970-1999. The tax smoothing hypothesis, tested on forty selected developing countries, is rejected. However, the hypothesis that economies with high levels of expenditure and taxation also have high levels of inflation tax, tested on the forty selected developing countries and on a larger sample (up to 112 developing countries) can not be rejected.GMM., panel unit root tests, developing countries, tax smoothing, Optimal seigniorage

How does Trade openness Influence Budget Deficits?

The influence of trade openness on economic growth via budget balance is surprisingly neglected in the literature, particularly since the theoretical and empirical studies have provided a positive and robust relationship between budget balance and economic growth. In this paper, we provide theoretical and empirical explanations about the way that trade openness influences budget balance by distinguishing the effects of natural openness from those of trade policy. The panel data analysis focuses on 66 developing countries for which we have the required data. We find that, theoretically and empirically, the effects of trade openness on budget balance through its effect on the instability of government revenue is quite clear: trade openness increases a country's exposure to external shocks (whether it is due to natural openness or to trade policy). This enforces the negative impacts of the instability of term of trade on budget balance. We also find that trade openness affects budget balance through many others channels (corruption, inequalities, etc). In this case, the additional effects on budget position of natural openness and trade policy are opposed: trade policy seems enhance budget surpluses, on the contrary, natural openness seems deteriorate budget deficits.panel data analysis., developing countries, Instability of term of trade, budget deficits, natural openness, outward-looking policy, trade openness

Politique d'ouverture commerciale et instabilité de la croissance économique : Le cas des pays du Moyen Orient et d’Afrique du Nord

This paper studies the impact of trade openness policy on economic growth volatility in Middle Eastern and North African countries. The observed trade openness is divided into natural openness and trade openness policy. Natural openness is determined by a country’s structural and geographical characteristics while trade openness policy depends on policy makers’ decisions. First, a specific indicator is elaborated for the trade openness policy. Then, the impact of trade openness policy is econometrically tested on 13 countries of the Middle East and North Africa over 1960-1999. The results show that countries with a more open trade policy are less volatile.Middle East and North Africa., economic growth volatility, Trade openness policy

The Jordanian Stock Market

We analyze the performance of the Amman Stock Exchange (ASE) and its integration with other markets. Using cointegration techniques, we find that the ASE and other Arab stock markets are cointegrated, which implies little long-run risk diversification. However, there is no cointegrating relationship between the ASE and other emerging or developed stock markets. Two of the main regional stock markets-Kuwait and Saudi Arabia-Grangercause the Jordanian stock market. The paper finds that there may have been some overvaluation at end-2005, but that the market correction in early 2006 and strong recent earnings growth have reduced overvaluation concerns.Stock markets;stock market, statistic, cointegration, stock exchange, bonds, equation, stock prices, statistics, overvaluation, correlation, standard deviation, granger causality, probability, stock market indices, correlations, stock market integration, stock index, descriptive statistics, prediction, stock market price, stock indices, time series, emerging stock valuations, stock returns, causation, equity markets, financial instruments, maximum likelihood estimator, financial market, financial markets, linear time trend, treasury bonds, stock price, linear time, predictability, international financial markets, linear trend, stock price index, perturbations, stock market decline, maximum likelihood estimation, hypothesis testing, international standards, present value, financial resources, stock market index, corporate bonds, stock portfolios, vector autoregression, foreign stock, financial economics, stock market prices, statistical analysis, stock valuation, international finance, sample size, nominal interest rate, statistical significance

To Smooth or Not to Smooth

This paper estimates the effect of grants and workers'' remittances on Jordan''s long-term equilibrium real exchange rate. We estimate an equilibrium path for the Jordanian real exchange rate using the Johansen cointegration methodology over the period 1964 to 2005. Controlling for other fundamentals, we find that both grants and workers'' remittances appreciate the equilibrium real exchange rate in a statistically and economically significant way. We also find that assessing deviations of the actual real exchange rate from the estimated equilibrium real exchange rate is nontrivial because different smoothing methodologies and the nonsmoothed estimates give very different results.Capital inflows;Workers remittances;Exchange rates;Economic models;exchange rate, real exchange rate, trade openness, terms of trade, equilibrium exchange rate, exchange rate regime, exchange rate misalignments, real exchange rates, real exchange rate misalignments, exchange rate misalignment, nontradable goods, effective exchange rate, real effective exchange rate, foreign exchange, tradable goods, nominal exchange rate, open economy, fixed exchange rate regime, exchange rate appreciation, trade restrictions, real exchange rate appreciation, fixed exchange rate, exchange rate crisis, foreign exchange market, current exchange rate, policy-induced openness, real exchange rate misalignment, dollar exchange rates, exchange rate regimes, oil prices, domestic demand, equilibrium model, history of exchange rate, exchange rate adjustment, importing country, factor markets, dual exchange rate, nominal effective exchange rate, exchange rate increases, import prices, nominal exchange rates, trading partner, exchange rate literature, domestic prices, per capita income, aggregate demand, risk diversification, domestic goods, open trade, undervalued exchange rate, trade deficits, partner countries, partner country, trade liberalization, commodity prices, exchange rate arrangements, trade regime, world prices, open trade regime, exchange rate overvaluation, exchange rate system

Global and Regional Spillovers to GCC Equity Markets

This paper analyzes the impact of global and regional spillovers to GCC equity markets. GCC equity markets were impacted by spillovers from U.S. equity markets despite varying degrees of foreign participation. Spillovers from regional equity markets were also important but the magnitude of the effects were on average smaller than that from mature markets. The results also illustrated episodes of contagion in particular during the recent global financial crisis. The findings suggest that given the degree of openness, and open capital accounts the financial channel is an important source through which volatility is transmitted. In this regard, GCC equity markets are not immune from global and regional financial shocks. These findings refute the notion of decoupling between the GCC equity and global equity markets.Stock markets;Spillovers;Economic models;External shocks;Regional shocks;equity markets, covariance, equations, correlation, stock market, heteroscedasticity, equation, correlations, statistics, equity market, standard errors, stock market crash, stock prices, random walk, financial sector, descriptive statistics, stock exchanges, financial market, stock market bubble, covariances, stock returns, financial markets, stock market developments, money market funds, probability, cointegration, stock market indices, stock exchange, hedging instruments, stock indices, asset markets, parameter vector, time series, hedging, stockholders, skewness, kurtosis, money market, emerging stock markets, financial instruments, sample size, stock market prices

A Barrel of Oil or a Bottle of Wine

This paper investigates the causes of extreme fluctuations in commodity prices from 1990 to 2010. Analyzing two very distinct commodities-crude oil and fine wine, we find that macroeconomic factors are the main determinants of commodity prices. Although supply constraints have the expected effect, aggregate demand growth is the key factor. The empirical results show that while advanced economies account for more than half of global consumption, emerging economies make up the bulk of the incremental change in demand, thereby having a greater weight in commodity price formation. The results also show that the shift in the composition of aggregate commodity demand is a recent phenomenon.Commodity prices;Oil;Agricultural commodities;Agricultural prices;Economic growth;Emerging markets;Oil prices;Oil sector;crude oil, oil demand, aggregate demand, crude oil prices, oil production, oil consumption, opec, oil supply, price fluctuations, crude oil production, oil market, output growth, econometric results, world economy, world oil demand, per capita income, oil shock, crude oil market, income elasticities, political economy, spot price, crude oil production data, capital flows, crude oil extraction, million barrels per day, nonrenewable resources, million barrels, oil extraction, energy information administration, market integration, domestic consumption, production level, econometric analysis, opec countries, global scale, international oil prices, petroleum exporting countries, exporting countries, organization of petroleum exporting countries