Stocks, Flows and Valuation Effects of Foreign Assets and Liabilities: Do They Matter?

Large holdings of foreign assets and liabilities, along with increasing relevance of valuation effects—capital gains or losses—have characterized global financial integration. In this paper, we assess empirically the implications of stocks, flows and valuation adjustments in external crises (current-account reversals, sudden stops and currency crises), sovereign credit ratings and the longrun real exchange rates (RER), in both industrial and developing economies. We find support for the view that foreign assets and liabilities are rather distinctive external holdings with different implications in the occurrence of external crisis. Valuation adjustments have an impact on crises, although quantitatively not very large. Portfolio liabilities (particularly equity) increase the probability of current-account reversals and currency crises, while the likelihood of sudden stops increases with the stock of foreign direct investment (FDI) assets. In the case of sovereign credit ratings, we find a noteworthy effect of the stock and flows of FDI liabilities on improving sovereign ratings. Finally, as for the RER, gross assets and liabilities appear equally important, but components of external holdings have considerably different effects. While the cumulative current account is associated with real depreciation, the valuation effect is strongly linked with real currency appreciations in developing economies.

Quantum fluctuating geometries and the information paradox

We study Hawking radiation on the quantum space-time of a collapsing null shell. We use the geometric optics approximation as in Hawking's original papers to treat the radiation. The quantum space-time is constructed by superposing the classical geometries associated with collapsing shells with uncertainty in their position and mass. We show that there are departures from thermality in the radiation even though we are not considering back reaction. One recovers the usual profile for the Hawking radiation as a function of frequency in the limit where the space-time is classical. However, when quantum corrections are taken into account, the profile of the Hawking radiation as a function of time contains information about the initial state of the collapsing shell. More work will be needed to determine if all the information can be recovered. The calculations show that non-trivial quantum effects can occur in regions of low curvature when horizons are involved, as for instance advocated in the firewall scenario.Comment: 25 pages, 3 figures, removed extra figure in previous version and made small change

Factores Macroecon�micos en Retornos Accionarios Chilenos

We evaluate the growth effects of real exchange rate (RER) misalignments and their volatility. We calculate RER misaligments as deviations of actual RERs from their equilibrium for 60 countries over 1965-2003 using panel and time series cointegration methods. Using dynamic panel data techniques we find that RER misalignments hinder growth but the effect is non-linear: growth declines are larger, the larger the size of the overvaluation. Although large undervaluations hurt growth, small to moderate undervaluations enhance growth. However, we find that it is difficult to follow a pro-growth RER policy. Finally, growth is hampered by highly volatile RER misalignments.

Addicted to Punishment: The Disproportionality of Drug Laws in Latin America

In Latin America, trafficking cocaine so it can be sold to someone who wants to use it is more serious than raping a woman or deliberately killingyour neighbor. While it may seem incredible, that is the conclusion of arigorous study of the evolution of criminal legislation in the region, which shows that countries' judicial systems mete out harsher penalties for traffickingeven modest amounts of drugs than for acts as heinous as sexua lassault or murder.How have we reached such an unjust and irrational point? In recent decades, especially the 1980s, Latin American countries, influenced by aninternational prohibitionist model, fell -- ironically -- into what we mightmetaphorically call an addiction to punishment.Addiction creates the need to consume more and more drugs, whichhave less and less effect; ultimately, the problematic user simply consumesdrugs to avoid withdrawal. Drug legislation in Latin America seems to have followed a similar path. Countries have an ever-growing need to add crimes and increase the penalties for drug trafficking, supposedly to control an expanding illegal market, while this increasingly punitive approach has less and less effect on decreasing the supply and use of illegal drugs.This report explores whether the recent evolution of criminal legislation in Latin American countries with regard to drug-related conducts respects these minimal guarantees to which criminal law should be subject, and especially whether that criminal legislation can be considered proportionate to the harm caused by prohibited conducts. Ultimately, the question is whether the crimes and punishments outlined in national legislation are proportionate. If the answer is no, the conclusion should be that they may even be unconstitutional within the framework of a constitutional state.To address this question, the report explores the recent development of criminal laws on drug-related crime in seven Latin American countries: Argentina, Bolivia, Brazil, Ecuador, Colombia, Peru and Mexico. These countries were chosen based on two basic criteria. First, they are of academic importance, because they have different drug-related problems, different geographic locations, diverse contexts and different political systems. According to traditional categorization, Colombia, Peru and Bolivia are considered producer countries; Mexico and even Brazil are considered trans-shipment countries. They also represent the different regions of Latin America,from the Southern Cone to the furthest Spanish-speaking country in North America.This report has three main parts. The first provides a conceptual and methodological overview of the elements that form the basis of the analysis.The second describes the principal recent trends in criminal drug legislation in Latin America. The third analyzes the proportionality of drug-related crimes and punishment in the countries, comparing them with penalties for other serious crimes, followed by some conclusions