Finance, foreign (direct) investment, and the Dutch disease: the case of Colombia

In recent years Colombia has grown relatively rapidly, but it has been a biased growth. The energy sector (the locomotora minero-energetica, to use the rhetorical expression of President Juan Manuel Santos) grew much faster than the rest of the economy, while the manufacturing sector registered a negative rate of growth. These are classic symptoms of the well-known ‘Dutch disease’, but our purpose here is not to establish whether the Dutch disease exists or not, but rather to shed some light on the financial viability of several, simultaneous dynamics: (i) the existence of a traditional Dutch Disease being due to a large increase in mining exports and a significant exchange rate appreciation; (ii) a massive increase in foreign direct investment (FDI), particularly in the mining sector; (iii) a rather passive monetary policy, aimed at increasing purchasing power via exchange rate appreciation; (iv) more recently, a large distribution of dividends from Colombia to the rest of the world and the accumulation of mounting financial liabilities. The paper will show that these dynamics constitute a potential danger for the stability of the Colombian economy. Some policy recommendations are also discussed

Non-tariff and overall protection: evidence across countries and over time

This paper analyzes the evolution of the incidence and intensity of non-tariff measures (NTMs). It extends earlier work by measuring protection from NTMs over time from a newly available database and provides evidence on the evolution of NTMs. In particular, building on Kee, Nicita and Olarreaga (2009), this paper estimates the ad valorem equivalents (AVEs) of NTMs for 97 countries at the product level over the period 1997 to 2015. We show that the incidence and the intensity of NTMs were both increasing over this period, with NTMs becoming an even more dominant source of trade protection. We are also able to investigate the evolution of overall protection derived jointly fromtariffs and NTMs. The results show that the overall protection level, for most countries and products, has not decreased despite the fall in tariffs associated with multilateral, regional and bilateral trade agreements in recent decades. We also document an increase in overall trade protection during the recent 2008 financial crisis. Overall, this study sheds light on an under-researched aspect of trade liberalization: the proliferation and increase of NTMs

The Dutch Disease in Reverse: Iceland's Natural Experiment

For a long time, abundant natural resources brought Iceland a high and volatile real exchange rate with adverse effects on manufacturing and services. During 2003-2008, another national treasure, the sovereign’s AAA rating, was used by privatized banks to attract foreign capital, elevating the real exchange rate even further. The financial collapse and the associated collapse of the currency in 2008 left the country with a large foreign debt which offset some of the effect of the natural resources on the real exchange rate. In effect, this was the Dutch disease in reverse as witnessed, in particular, by a massive increase in the number of tourists following the financial collapse. This paper discusses the behavior of the exchange rate of the Icelandic króna before and after 2008 as well as its relationship to natural resources, capital flows, output, exports and imports, including tourism

Determination of sin2 θeff w using jet charge measurements in hadronic Z decays

The electroweak mixing angle is determined with high precision from measurements of the mean difference between forward and backward hemisphere charges in hadronic decays of the Z. A data sample of 2.5 million hadronic Z decays recorded over the period 1990 to 1994 in the ALEPH detector at LEP is used. The mean charge separation between event hemispheres containing the original quark and antiquark is measured for bb̄ and cc̄ events in subsamples selected by their long lifetimes or using fast D*'s. The corresponding average charge separation for light quarks is measured in an inclusive sample from the anticorrelation between charges of opposite hemispheres and agrees with predictions of hadronisation models with a precision of 2%. It is shown that differences between light quark charge separations and the measured average can be determined using hadronisation models, with systematic uncertainties constrained by measurements of inclusive production of kaons, protons and A's. The separations are used to measure the electroweak mixing angle precisely as sin2 θeff w = 0.2322 ± 0.0008(exp. stat.) ±0.0007(exp. syst.) ± 0.0008(sep.). The first two errors are due to purely experimental sources whereas the third stems from uncertainties in the quark charge separations