Institutional Affiliation: Millennium Challenge Corporation
|Mexico's 1994 Exchange Rate Crisis Interpreted in Light of the Non-Traded Model|
This paper attempts to make the case that a 2-sector model using the familiar traded non-traded distinction offers a reasonably successful empirical account of why Mexico needed to devalue its exchange rate in 1994. This model provides a way to define and measure disequilibrium in the exchange rate, and thus may be useful in assessing the likelihood of an exchange rate crisis in other developing countries. The results suggest that Mexico's exchange rate was about 25 percent overvalued on the eve of its 1994 crisis, but was much closer to equilibrium by the end of 1996. The approach in this paper is compared with other ways of assessing disequilibrium in the exchange rate, based on purchasing power parity or monetary models of the exchange rate.
|Trends in Regional Inequality in China|
with Tianlun Jian, : w5412
Several recent studies have examined the tendency of regions within a nation to exhibit long-term convergence in per capita income levels. Barro and Sala-i-Martin (1991, 1992, 1995) have found a tendency towards convergence among the U.S. states, among Japanese prefectures, and among regions within Western Europe. In this paper we examine the tendency towards convergence among the provinces of China during the period 1952-1993. We find that real income convergence of provinces in China has been a relatively recent phenomenon, emerging strongly only since the reform period began in 1978. During the initial phase of central planning, 1952-1965, there is some evidence for convergence, but it is weak and sensitive to the time period being analyzed. During the cultural revolution, 1965- 19...
Published: China Economic Review, Vol. 7, no. 1 (1996). citation courtesy of
|Natural Resource Abundance and Economic Growth|
with : w5398
One of the surprising features of modern economic growth is that economies with abundant natural resources have tended to grow less rapidly than natural-resource-scarce economies. In this paper we show that economies with a high ratio of natural resource exports to GDP in 1971 (the base year) tended to have low growth rates during the subsequent period 1971-89. This negative relationship holds true even after controlling for variables found to be important for economic growth, such as initial per capita income, trade policy, government efficiency, investment rates, and other variables. We explore the possible pathways for this negative relationship by studying the cross-country effects of resource endowments on trade policy, bureaucratic efficiency, and other determinants of growth. We...
|Economic Convergence and Economic Policies|
with : w5039
Many of the crucial debates in development economics are encapsulated in the question of economic convergence. Is there a tendency for the poorer countries to grow more rapidly than the richer countries, and thereby to converge in living standards? Some recent research on endogenous growth has emphasized increasing returns as a possible reason not to expect convergence. Other research has suggested that convergence may be achieved only after poor countries attain a threshold level of income or human capital. This paper presents evidence that a sufficient condition for higher-than-average growth of poorer countries, and therefore convergence, is that poorer countries follow reasonably efficient economic policies, mainly open trade and protection of private property rights.
Published: Brookings Papers on Economic Activity, ed. William Brainard and George Perry, 1:1995, 1-95, 108-118.