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Bulletin Logo    June 2000
Volume 1, Number 1
In This Issue

Research Summary
   Inflation and Growth
   Inflation Targeting in Non-Industrial Countries

Table of Contents of IMF Staff Papers (September/December 1999)

IMF Occasional Papers

New Dataset

Conference Reports
   Conference on capital Flow and Debt Statistics:
      Can We Get Better Data Faster?
   Seminar: Agenda for Sequencing Decentralization in Indonesia
   Conference on Implementing Inflation Targeting
   Conference on International Financial Contagion:
      How It Spreads, How It Can Be Stopped

External Publications of IMF Staff in 1999
   Journal Articles
   Other External Publications: Including Books, Conference Volumes

Visiting Scholars at the IMF, January–March 2000

Work in Progress

Research Summary
Inflation and Growth
Atish R. Ghosh

Rapid output growth and low inflation are among the most important objectives of macroeconomic policy. But are they complements? Or are there trade-offs between lowering inflation and achieving high growth? This question, central to the IMF's program and surveillance activities, has long been an area of active research within the Fund, with more than two dozen research papers written on the subject in the past five years alone.

The focus of this literature is more the long-run growth and inflation performance of countries than the short-run Phillips curve considerations (though there has been a fair amount of research at the Fund on the latter as well),1 and part of the impetus for this literature was the experience of the transition economies. It did not take researchers long to notice that the transition economies that achieved low inflation were also the ones that achieved the fastest turn around in output growth.2 Beyond the transition economies, two papers (not written at the Fund) were particularly influential. Fischer (1993) showed that high inflation (presumably reflecting the distortive effects of relative price uncertainty) was associated with lower GDP growth, while Bruno and Easterly (1998) argued that "[while] the case for a negative association of inflation and growth is firmly established when we look at the temporal association of growth with discrete high inflation crises... the case for growth effects of low to moderate rates of inflation remain very much ambiguous."3

Much of the research on inflation and growth at the Fund has thus tried to answer three key questions: (i) is there a robust negative relationship between inflation and growth? (ii) is there a "kink" in the relationship so that, at very low levels of inflation, the relationship is positive (perhaps due to Phillips curve effects)? (iii) does inflation have to reach some minimum "threshold" before the growth effects become serious?

Sarel (1996), in a panel study, argued that there was indeed a (very) low inflation "kink" in the relationship (at around 8 percent), below which the relationship switches signs (inflation and growth are positively correlated). Neither Sarel (1996) nor a subsequent paper by Ghosh and Phillips (1998), however, found any evidence of a "threshold effect."4 In fact, beyond the low inflation "kink," the negative relationship is rather smooth and convex –actually well approximated by a logarithmic function so that the greatest marginal loss in growth occurs at low inflation rates. A linear model, in which a 1 percentage point increase in the rate of inflation has the same effect irrespective of whether the initial inflation rate is 10 percent or 100 percent per year seems implausible. A logarithmic model, in contrast, implies that doubling the initial inflation rate has the same effect.

The results suggest that the inflation-growth relationship is less like falling off a precipice than like going down a playground slide (the old-fashioned kind, with a ladder at the back, and a metal slide in the front). Let the vertical height represent GDP growth, and the horizontal distance traveled represent the inflation rate. Assuming the ladder is slightly sloped forward, in the first few inches (initial low inflation) height rises (GDP growth increases). The top of the ladder (and the beginning of the slide) represents the "kink" point. Beyond that, height is lost rapidly at the start of the slide (GDP growth falls quickly with increasing inflation); by the end of the slide, the marginal loss in height is small, but the total height off the ground is also low. (The slide analogy is sadly apt: many countries find it easy to slip into high inflation and low growth; climbing back up is rather more difficult.)

These basic results have been confirmed in a large number of panel, cross-section, and individual country studies undertaken at the Fund.5 The magnitude of the effect differs across samples and studies, but it is roughly on the order of ½ percentage point of (per capita) growth for each doubling of the inflation rate (beyond the "kink"). Of course, these papers are careful not to make claims of causality, but it is interesting to note that the statistical relationship between inflation and growth remains even after controlling for the usual suspects--fiscal performance, wars, droughts, population growth, openness, and even human and physical capital--and allowing for simultaneity bias. More generally, attaining low inflation may be part of a package of reforms, and a few papers have tried to look at interactions and policy complementarities explicitly.6

Much of the more recent and current research on this topic tries to pin down more precisely the location of the "low" inflation kink, and whether the estimated effects of inflation on growth depend, inter alia, on the stage of economic development, the degree of capital mobility, the structure of the economy, or the exchange rate regime (the sacrifice ratio under money versus exchange rate based stabilizations is a literature unto itself, and is not surveyed here).7

As countries move down the inflation scale, and reap the growth bonus, these issues will gain even greater importance--and will surely continue to be active areas of research at the Fund.

1Chadha, Masson, and Meredith, "Models of Inflation and the Costs of Disinflation," IMF Staff Papers, June 1992, pp. 395–431; Clark, Laxton, and Rose, "Asymmetry in the U.S. Output-Inflation Nexus," IMF Staff Papers, March 1996, pp. 216–51; Hogan "Explaining the Recent Behavior of Inflation and Unemployment in the United States," (WP/98/145).
2Fischer, Sahay, and Vegh, "From Transition to Market: Evidence and Growth Prospects," in Salvatore Zecchini, ed., Lessons from the Economic Transition; Fischer, Sahay, and Vegh, "Economies in Transition: The Beginnings of Growth" American Economic Review Papers and Proceedings, May 1996, pp. 229–33; Ghosh, "Inflation in Transition Economies: How Much? And Why?" (WP/97/80); Christoffersen and Doyle "From Inflation to Growth: Eight Years of Transition," (WP/98/100); Havrylyshyn, Izvorski, and van Rooden, "Recovery and Growth in Transition Economies: 1990–97: A Stylized Regression Analysis," (WP/98/141); Berg, Borensztein, Sahay, Zettelmeyer, "The Evolution of Output in Transition Economies: Explaining the Differences," (WP/99/83); Kalra and Slok "Inflation and Growth in Transition: Are the Asian Economies Different?" (WP/99/118); Cottarelli and Doyle, "Disinflation in Transition." (Occasional Paper No. 179).
3Fischer, "The Role of Macroeconomic Factors in Growth," Journal of Monetary Economics, December 1993, pp. 485–512; Bruno and Easterly, "Inflation Crises and Long-run Growth," Journal of Monetary Economics, February 1998, pp. 3–26.
4Sarel "Non-linear Effects of Inflation on Economic Growth," IMF Staff Papers, March 1996, pp. 199–215; Ghosh and Phillips, "Warning: Inflation May Be Harmful to Your Growth," IMF Staff Papers, December 1998, pp. 672–710.
5De Gregorio, "The Effects of Inflation on Growth: Lessons from Latin America," (WP/91/95) European Economic Review, April 1992, pp. 417–25; Ghosh, "The Output-Inflation Nexus in Ukraine--Is there a Trade off?" (WP/96/46); Glyfson, "Exports, Inflation, and Growth," (WP/97/119); Ma, "Inflation, Uncertainty and Growth in Colombia," (WP/98/161); Phillips "Inflation: The Case for a More Resolute Approach" in Bredekamp and Schadler (eds.) Economic Adjustment and Reform in Low-Income Countries (IMF, 1999); Braumann and Shah, "Suriname: A Case Study of High Inflation," (WP/99/157); Braumann, "Real Effects of High Inflation," (WP/00/85); Fischer, Sahay, and Vegh, "Modern Hyper- and High Inflations," (forthcoming WP); Jadresic and Zahler, "Chile's Rapid Growth in the 1990s: Good Policies, Good Luck, or Political Change?" (forthcoming WP); and others included in various Staff Studies or Recent Economic Developments Reports.
6Aziz and Wescott, "Policy Complementarities and the Washington Consensus," (WP/97/118); Ghosh and Phillips, "Warning: Inflation May Be Harmful to Your Growth," IMF Staff Papers, December 1998, pp. 672–710.
7Leidy and Tokarick "Considerations in Reducing Inflation From Low to Lower Levels" (WP/98/109); Loungani, Razin, and Yuen "Capital Mobility and the Output-Inflation Trade-Off" (WP/00/87); Khan and Senhadji "Threshold Effects in the Relationship Between Inflation and Growth" (forthcoming WP).

Research Summary
Inflation Targeting in Non-Industrial Countries
Miguel A. Savastano

The adoption of inflation targeting (IT) as a framework for monetary policy by a number of industrial countries in the early 1990s made IT one of the most widely researched topics in the field of monetary economics during the last decade.1 By the mid 1990s, questions about the applicability of this policy framework to non-industrial countries started to gather momentum. Unlike in the case of industrial countries, where IMF work on IT developed in parallel with a large body of outside literature, the Fund quickly became a major contributor to this area of research. In fact, in the last four years IMF staff have produced more than twenty research papers on the broad theme of the applicability of IT to non-industrial countries, including some theoretical contributions motivated, at least partly, by the interest in expanding IT beyond the realm of industrial economies.

The early stage of this research program was mainly exploratory. Studies at this stage were generally concerned with identifying the prerequisites for the adoption of IT, clarifying the basic components of the framework, assessing (formally, in some cases) the degree of compliance with those prerequisites and components, and gauging the benefits of using inflation targets as the main anchor for monetary policy in non-industrial countries. The majority of studies focused on specific regions or countries, mostly from Central and Eastern Europe and South East Asia.2 The two exceptions were the studies by Masson, Savastano and Sharma (1997) and Eichengreen, Masson, Savastano and Sharma (1999), which examined the issue of the applicability of IT to developing countries in general--though the latter piece placed the question in a somewhat more restricted context.3

As a number of emerging market countries actually started to adopt IT as a monetary policy framework, or accelerated their "transitioning" towards that framework, the Fund research in this area moved to a second stage, and began to focus on specific aspects of the implementation and operation of IT in those economies. Thus, for example, De Fiore (1998) examined econometrically the relative importance of different transmission channels of monetary policy in Israel under IT; Clifton (1999) also analyzed the experience of Israel to illustrate the possible drawbacks of relying on target bands to anchor inflation expectations; Leone (1999) documented the rapid implementation of IT in Brazil following the currency crisis of early 1999; Mishkin and Savastano (2000) illustrated the uneven transition towards IT in Chile, Colombia, Mexico, Peru and Brazil during the 1990s; and Corker, Beaumont, van Elkan and Iakova (2000) discussed the modifications to the IT framework that the Czech Republic and Poland may need to consider as they approach the date of accession to the European Union.4 The experience with IT of most of these emerging economies is comprehensively summarized in a forthcoming study by Schaechter, Stone and Zelmer (2000) which, in addition, highlights the commonalities and differences of the IT frameworks adopted by those economies compared to those of industrial countries.5

The Fund's contribution to the theoretical literature on IT was pioneered by Green (1996) who showed, in a modified Barro-Gordon setting, that announcing inflation targets was not sufficient to eliminate the "inflation bias" from monetary policy and, hence, to bolster credibility, unless the central bank also announced output targets that were consistent with the targets on inflation.6 Of the ensuing theoretical work on this topic at the IMF the studies of Beddies (1999) and Jadresic (1999) shed light on aspects of IT of particular importance for emerging economies.7 Using completely different models, both of which stress features that are prominent in developing countries--the reliance on seigniorage and the presence of "sticky-prices," respectively--these studies show that (strict) inflation targeting will generally be associated with "excessive" output instability, and that this result may or may not disappear under alternative specifications of the problem.

The growing interest on IT in emerging market economies, and the various modifications and adaptations that the framework is likely to undergo as it becomes adopted, and tested, in a larger sample of (developing) countries makes this a very fertile area for future research, both inside and outside the Fund.

1See Bernanke, Laubach, Mishkin and Posen, Inflation Targeting: Lessons from the International Experience, Princeton University Press, 1999 for a comprehensive overview of the issues and a summary of the literature. Debelle, "Inflation Targeting in Practice" (WP/97/35) also reviews the experience of industrial economies drawing partly on the (early) research on those countries done at the Fund.
2Studies on the applicability of IT to the transition economies of Central and Eastern Europe are those of Begg, "Monetary Policy in Central and Eastern Europe: Lessons After Half a Decade of Transition," (WP/96/108), Wagner, "Central Banking in Transition Countries," (WP/98/126), Christoffersen and Wescott, "Is Poland Ready for Inflation Targeting?" (WP/99/41), and Masson, "Monetary and Exchange Rate Policy of Transition Economies of Central and Eastern Europe after the Launch of EMU," (PDP/99/5). Those focused on the economies of South East Asia are Dekle and Pradhan, "Financial Liberalization and Money Demand in ASEAN Countries: Implications for Monetary Policy," (WP/97/36), Houben, "Exchange Rate and Monetary Strategy Options in the Philippines--The Search for Stability and Sustainability," (PPAA/97/4), Debelle and Lim, "Preliminary Considerations of an Inflation Targeting Framework for the Philippines," (WP/98/39), and Hoffmaister, "Inflation Targeting in Korea: An Empirical Exploration," (WP/99/7). The only study of this group that focused on a country outside the two regions is the one by Jonsson, "The Relative Merits and Implications of Inflation Targeting for South Africa," (WP/99/116).
3Masson, Savastano, and Sharma, "The Scope for Inflation Targeting in Developing Countries," (WP/97/130); Eichengreen, Masson, Savastano, and Sharma, "Transition Strategies and Nominal Anchors on the Road to Greater Exchange Rate Flexibility," Princeton Essays in International Finance, No. 213, April 1999.
4De Fiore, "The Transmission of Monetary Policy in Israel," (WP/98/114); Clifton, "Inflation Targeting: What is the Meaning of the Bottom of the Band?"(PDP/99/8); Leone, "Inflation Targeting in the Brazilian Setting," IMF Country Report 99/97; Mihskin and Savastano, "Monetary Policy Strategies for Latin America," NBER Working Paper 7617, March 2000; Corker, Beaumont, van Elkan and Iakova, "Exchange Rate Regimes in Selected Advanced Transition Economies--Coping with Transition, Capital Inflows, and EU Accession," (PDP/00/3).
5Schaechter, Stone and Zelmer, "Institutional and Operational Issues in Adopting Inflation Targeting by Emerging Market Countries," IMF mimeo, forthcoming.
6Green, "Inflation Targeting: Theory and Policy Implications," IMF Staff Papers, Vol. 43, December 1996.
7Beddies, "Monetary Policy and Public Finances: Inflation Targets in a New Perspective," (WP/99/26-forthcoming IMF Staff Papers); Jadresic, "Inflation Targeting and Output Stability," (WP/99/61).

IMF Staff Papers
September/December 1999

Determinants and Leading Indicators of Banking Crises: Further Evidence
Daniel C. Hardy and Ceyla Pazarbasioglu

Time Series Analysis of Export Demand Equations: A Cross-Country Analysis
Abdelhak S. Senhadji and Claudio E. Montenegro

The Uzbek Growth Puzzle
Jeromin Zettelmeyer

Monetary Policy and Public Finances: Inflation Targets in a New Perspective
Christian H. Beddies

Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union
Giovanni Dell'Ariccia

IMF Staff Papers, the IMF's scholarly journal, edited by Robert Flood, publishes selected high-quality research produced by IMF staff and invited guests on a variety of topics of interest to a broad audience including academics and policymakers in the member countries of the IMF. The papers selected for publication in the journal are subject to a rigorous review process using both internal and external referees. The journal and its contents (including an archive of articles from past issues) are available online at http://www.imf.org/external/pubs/ft/staffp/index.htm.

IMF Occasional Papers
January–March 2000

IMF Occasional Paper No. 186
Anticipating Balance of Payments Crises--The Role of Early Warning Systems
Berg, Andrew; Borensztein, Eduardo; Milesi-Ferretti, Gian Maria; and Pattillo, Catherine

IMF Occasional Paper No. 187
Philippines: Toward Sustainable and Rapid Growth
Rodlauer, M; Loungani, P.; Arora, V.; Christofides, C.; De la Piedra, E.G.; Kongsamut, P.; Kostial, K.; Summers, V. and Vamvakidis A.

IMF Occasional Paper No. 188
Financial Sector Crisis and Restructuring: Lessons from Asia
Lindgren, Carl-Johan; Balino, J.T.; Enoch, Charles; Gulde, Anne-Marie; Quintyn, Marc; and Teo, Leslie

IMF Occasional Paper No. 189
Current Account and External Sustainability in the Baltics, Russia, and Other Countries of the Former Soviet Union
McGettigan, Donal

IMF Occasional Paper No. 190
Country Experiences with the Use and Liberalization of Capital Controls
Ariyoshi, Akira; Habermeier, Karl; Laurens, Bernard; Otker-Robe, Inci; Canales-Kriljenko, Jorge Ivan; and Kirilenko, Andrei

IMF Occasional Paper No. 191
Social Issues in IMF-Supported Programs
Gupta, Sanjeev; Dicks-Mireaux, Louis; Khemani, Ritha; McDonald, Calvin; and Verhoeven, Marijn

New Dataset

The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries
Philip R. Lane, Trinity College, Dublin and Gian Maria Milesi-Ferretti, IMF

The aim of this dataset is to provide a comprehensive set of estimates of the international investment positions of 66 countries for the period 1970–1997, using primarily balance of payments data on capital flows. The estimates are based on existing stock measures, when available, supplemented by the cumulation of capital flows, with appropriate valuation adjustments. Gross international investment position data are available for several industrial countries, typically starting in the 1980s For those countries, the dataset provides a longer time series for assets and liabilities, based on (adjusted) cumulative flow data. For developing countries, the contribution of the dataset is more substantial because stock data are generally available only for gross external debt and foreign exchange reserves (data on international investment positions are available for only a few countries and a very limited number of years). An additional contribution consists in adjusting the estimated stock measures for equity and foreign direct investment so as to reflect, albeit crudely, the effect of changes in market prices and exchange rates.

The data would be of interest to applied international economists working on international capital flows. The working paper describing the data and methodology (IMF Working Paper 99/115, August 1999), along with the dataset and the documentation, are publicly available through the Research at the IMF website: http://www.imf.org/research.

Conference Reports
Conference on Capital Flow and Debt Statistics:
Can We Get Better Data Faster?

This conference, sponsored by the Statistics Department and the Policy and Development Review Department, in Cooperation with the Financial Stability Forum Working Group on Capital Flows, took place in Washington, DC on February 23–24, 2000.

The focus of the conference was on what actions and resources would be required to provide better and more timely data on capital flows and debt and what specific initiatives should be given priority. Approximately 120 senior-level data users, policymakers, and data compilers participated in the conference, which was intended to generate a dialogue between data users and compilers, discuss recent initiatives to improve data on capital flow and debt statistics, and identify priorities for further work in this area.

Proceedings of IMF conferences and seminars, including agenda and papers, can be obtained though the "Conferences, Seminars and Workshops" link at theResearch at the IMFwebsite: http://www.imf.org/research.

Seminar: Agenda for Sequencing Decentralization in Indonesia

This seminar on Indonesian decentralization and its management, sponsored by the World Bank and the Fiscal Affairs Department of the IMF, was held in Jakarta, Indonesia on March 20–21, 2000. The seminar was intended to provide the opportunity for an exchange of views on the next steps for decentralization in Indonesia, given the country's political realities, as well as the experiences of other countries. The forum included officials from various central government agencies, as well as representatives of regional governments, academics, international scholars, and participants with experience in decentralization processes in other countries around the world.

Proceedings of IMF conferences and seminars, including agenda and papers, can be obtained though the "Conferences, Seminars and Workshops" link at the Research at the IMF website: http://www.imf.org/research.

Conference on Implementing Inflation Targeting

A high-level seminar organized by the IMF Institute on March 20–21, 2000 brought together top academics and policymakers to discuss issues related to the implementation of inflation targeting. A brief summary of the conference follows.

Leading off, Stanley Fischer put inflation targeting into a broader macroeconomic context. Inflation targeting may be a means to attain the ultimate goal of macroeconomic policy, namely high and stable growth. Fischer noted several examples of inflation targeting, as well as potential cases where inflation targeting might be well suited.

Relating inflation targeting to the older rules-versus-discretion debate in macroeconomics, Bennett McCallum proposed backward-looking rules to target either a monetary aggregates or an interest rate. His counterfactual estimates suggest that if policy makers in several industrial economies adhered to such a rule, inflation would have been substantially reduced over the past three decades. He preferred targeting monetary aggregates (specifically, base money) to interest rates since the former is simpler.

Vincent Reinhart noted that, to maximize consumer welfare, policy makers should follow a forward-looking interest rate rule. Such a rule is somewhat closer to inflation targeting as currently practiced. Lars Svensson emphasized that inflation targeting regimes helped policy makers focus on one goal, but not exclusively so. He noted that it would be very difficult to eliminate the discretionary element from policy, but that inflation targeting placed constraints on otherwise unconstrained discretion. He also discussed the inherent tradeoff between price and output variability.

Michael Mussa discussed, inter alia, the most appropriate measure of inflation to be targeted. While omitting supply shocks to petroleum and food might theoretically be desirable, the public might have difficulty understanding the "cold and hungry CPI." Timothy Lane discussed inflation targeting in the context of IMF programs. Care must be taken, he emphasized, to assure that inflation goals are consistent with other program targets like net domestic assets or net international reserves.

Next, policy makers from several countries discussed the actual implementation of inflation targeting. Charles Freedman discussed the Canadian experience that started in 1991. After attempts to restrain inflation by targeting monetary aggregates repeatedly failed, the Bank of Canada shifted to inflation targeting. With limited success, exchange rate movements were also included in a monetary conditions index. Considerable emphasis was placed on both inflation forecasting and transparency.

David Archer noted that in New Zealand, consumer price inflation, purged of interest payments, is recognized as the only target and little attention is paid to intermediate indicators. The central bank aims for clear and transparent communication with the public. Any country faces a tradeoff between output variability and price variability. Archer's research suggested that output variability is minimized at relatively low rates of inflation and that inflation targeting had not boosted output variability in New Zealand. Andrew Haldane stressed the proactive nature of inflation targeting in the UK. Often, indications of future inflation are "ghosts", not visible to the naked eye, and central bankers are cast in the role of "ghostbusters". Owing to the long and variable lags in monetary policy, the Bank of England devotes considerable resources to inflation forecasting.

Leonardo Leiderman suggested that when inflation targeting was adopted in Israel, monetary policy discussions at the central bank became substantially more focussed. Historically, inflation had been high and the central bank lacked credibility. Thus, a key element of inflation targeting, especially in light of recent budgetary imbalances, would be a supportive fiscal policy. Alejandro Werner (in a paper co-authored with Agustín Carstens) noted that Mexico has been gradually moving toward an inflation-targeting regime. In recent years, as inflation has fallen, Mexico has published targets for both monetary aggregate and inflation. Sergio Werlang discussed how inflation targeting emerged from the devaluation of the Real in early 1999. As the country moved toward a more flexible exchange rate and important fiscal adjustments were made, Brazilian policy became more transparent and understandable for the public.

Leonardo Leiderman and Eduardo Aninat provided some summary remarks.
--Evan Tanner

Proceedings of IMF conferences and seminars, including agenda and papers, can be obtained though the "Conferences, Seminars and Workshops" link at the Research at the IMF website: http://www.imf.org/ research.

Conference on International Financial Contagion:
How it Spreads, How It Can Be Stopped

This conference, sponsored jointly by the World Bank, the Asian Development Bank and the IMF, was held in Washington, DC on February 3–4, 2000. A listing of papers presented at the conference follows. The papers can be obtained at the website noted below.

The Center and the Periphery: Tales of Financial Turmoil
Graciela L. Kaminsky and Carmen M. Reinhart

The Channels for Financial Contagion
Matt Pritsker

Contagion: How It Spreads and How It Can Be Stopped
Rudiger Dornbusch, Yung Chul Park, and Stijn Claessens

Contagion of International Financial Crises: The Case of Mexico
Santiago Bazdresch and Alejandro M. Werner

Crisis Transmission: Evidence from the Debt, Tequila and Asian Flu Crises
Jose De Gregorio, and Rodrigo O. Valdes

Economic Fragility, Liquidity, and Risk: The Behavior of Mutual Funds during Crisis
Graciela Kaminski, Richard Lyons, and Sergio Schmukler

Financial Contagion in the East Asian Crisis-With Special Reference to the Republic of Korea
Yung Chul Park and Chi-Young Song

Financial Contagion: Spillovers through Banking Centers
Caroline Van Rijckeghem and Beatrice Weder

Financial Market Spillovers in Transition Economies
R. Gaston Gelos and Ratna Sahay

Flight to Quality
Barry Eichengreen, Galina Hale and Ashoka Mody

International Contagion: Implications for Policy
Roberto Chang and Giovanni Majnoni

The International Transmission of Financial Crises before World War II: Was there Contagion?
Michael D. Bordo and Antu P. Murshid

Lending in Emerging Markets: Foreign and Domestic Banks Compared
Linda Goldberg, Gerard Dages and Daniel Kinney

Looking for Contagion: Evidence from the 1992 ERM Crisis
Carlo A. Favero and Francesco Giavazzi

Managers, Investors and Crises: Mutual Fund Strategies in Emerging Markets
Graciela Kaminski, Richard Lyons, and Sergio Schmukler

Measuring Contagion: Conceptual and
Empirical Issues

Kristin Forbes and Roberto Rigobon

Portfolio Diversification, Leverage and Financial Contagion
Garry J. Schinasi and R. Todd Smith

The Portfolio Flows of International Investors
Kenneth A. Froot, Paul G. J. O'Connell, Mark S. Seasholes

The Russian Default and the Contagion to Brazil
Ilan Goldfajn and Taimur Baig

Thai Meltdown and Transmission of Recession with Asian4 and NIE4
Tilak Abeysinghe

Proceedings of IMF conferences and seminars, including agenda and papers, can be obtained though the "Conferences, Seminars and Workshops" link at the Research at the IMF website: http://www.imf.org/ research.  

External Publications of IMF Staff in 1999
Including publications co-authored with outside authors

Journal Articles

Agénor, Pierre-Richard; Bismut, Claude; Cashin, Paul; McDermott, C. John
Consumption Smoothing and the Current Account: Evidence for France, 1970–96, Journal of International Money and Finance

Agénor, Pierre-Richard; Masson, Paul
Credibility, Reputation, and the Mexican Peso Crisis, Journal of Money, Credit and Banking

Aitken, Brian; Harrison, Ann
Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela, American Economic Review

Bakker, Bas; Hilbers, Paul; Martijn, Jan Kees
Climate Control in a Monetary Union, Economisch Statistische Berichten

Baland, Jean-Marie; Dreze, Jean; Leruth, Luc
Daily Wages and Piece Rates in Agrarian Economies, Journal of Development Economics

Barnett, Steven A.; Sakellaris, Plutarchos
A New Look at Firm Market Value, Investment, and Adjustment Costs, Review of Economics and Statistics

Bartolini, Leonardo; Prati, Alessandro
Soft Exchange Rate Bands and Speculative Attacks: Theory and Evidence From the ERM Since August 1993, Journal of International Economics

Bayoumi, Tamim; Coe, David; Helpman, Elhanan
R&D Spillovers and Global Growth, Journal of International Economics

Blejer, Mario; Schumacher, L.
Central Bank Vulnerability and the Credibility of Commitments: A Value-at-Risk Approach to Currency Crises, Journal of Risk

Bogetic, Zeljko; Petrovic, Pavle; Vujosevic, Zorica
The Yugoslav Hyperinflation of 1992–1994: Causes, Dynamics, and Money Supply Process, Journal of Comparative Economics

Carneiro, F. G.; de Mello, Luiz
Exchange Rate Management: The Case of Brazil, Estudos Econômicos

Clark, Peter B.; Goodhart, Charles A. E.; Huang, Haizhou
Optimal Monetary Policy Rules in a Rational Expectations Model of the Philips Curve, Journal of Monetary Economics

Clements, Benedict; Schwartz, Gerd
Government Subsidies, Journal of Economic Surveys

Cordella, Tito; Foucault, T.
Minimum Price Variations, Time Priority and Quote Dynamics, Journal of Financial Intermediation

Corneo, G.; Jeanne, Olivier
Segmented Communication and Fashionable Behavior, Journal of Economic Behavior and Organization

Corneo, G.; Jeanne, Olivier
Social Organization in an Endogenous Growth Model, International Economic Review

Corneo, G.; Jeanne, Olivier
Pecuniary Emulation, Inequality and Growth, European Economic Review

Davoodi, Hamid; Xie, Danyang; Zou, Heng-fu
Fiscal Decentralization and Economic Growth in the United States, Journal of Urban Economics

de Mello, Luiz
Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data, Oxford Economic Papers

de Mello, Luiz
Intergovernmental Fiscal Relations: Co-ordination Failures and Fiscal Outcomes, Public Budgeting and Finance

de Mello, Luiz; Hussein, K.
International Capital Mobility in Developing Countries: Theory and Evidence, Journal of International Money and Finance

de Palma, Andre; Leruth, Luc; Régibeau, Pierre
Partial Compatibility with Network Externalities and Double Purchase, Information Economics and Policy

Dell'Ariccia, Giovanni; Friedman, Ezra; Marquez, Robert
Adverse Selection as a Barrier to Entry in the Banking Industry, RAND Journal of Economics

Detragiache, Enrica; Hamann, A. J.
Exchange Rate-Based Stabilization in Western Europe: Greece, Ireland, Italy, and Portugal., Contemporary Economic Policy

Duggan, James E.; Gillingham, Robert
The Effect of Errors in the CPI on Social Security Finances, Journal of Business and Economic Statistics

Fischer, Stanley
Reforming the International Financial System, Economic Journal Fischer, Stanley
On the Need for an International Lender of Last Resort, Journal of Economic Perspectives

Garfinkel, Michelle; Glazer, Amihai; Lee, Jaewoo
Election Surprises and Exchange Rate Uncertainty, Economics and Politics

Gupta, Sanjeev
Economic transition and social protection: issues and agenda for reform, Reflets et Perspectives de la Vie Economique

Hanson, Gordon; Spilimbergo, Antonio
Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the US-Mexico Border, American Economic Review

Henstridge, Mark N.
Demonetisation, Inflation and Coffee: the Demand for Money in Uganda, Journal of African Economies

Hilbers, Paul
The IMF, Asia and the Financial Sector, Economisch Statistische Berichten

Hindriks, J.; Keen, Michael; Muthoo, A.
Corruption, Extortion and Evasion, Journal of Public Economics

Konuki, Tetsuya
Measuring Noise in Exchange Rate Models, Journal of International Economics

Kotlikoff, Laurence J.; Smetters, Kent A.; Walliser, Jan
Privatizing Social Security in the U.S.: Comparing the Options, Review of Economic Dynamics

Krishna, Kala; Tan, Ling Hui
Transferable Licenses vs. Nontransferable Licenses: What is the Difference?, International Economic Review

Lane, Timothy
Predicting the Ecolution of the Asian Crisis: A View From the IMF, Economic Notes

Lee, Jaewoo
The Effect of Exchange Rate Volatility on Trade in Durables, Review of International Economics

Leruth, Luc
Dette publique, coutume judiciaire et autres instruments de transferts inter-générationnels: le match UE-EU, Reflets et Perspectives de la Vie Economique

Ligthart, Jenny; van der Ploeg, F.
Environmental Policy, Tax Incidence, and the Cost of Public Funds, Environmental and Resource Economics

Lybek, Tonny
Central Bank Autonomy, and Inflation and Output Performance in the Baltic States, Russia, and Other Countries of the Former Soviet union, 1995–1997, Russian and East European Finance and Trade

Masson, Paul
Contagion: Macroeconomic Models with Multiple Equilibria, Journal of International Money and Finance

Mussa, Michael
Policies to Avoid or Ameliorate Financial Crises, Journal of Policy Modeling

Prasad, Eswar
International Trade and the Business Cycle, The Economic Journal

Reppelin-Hill, Valérie
Trade and Environment: An Empirical Analysis of the Technology Effect in the Steel Industry, Journal of Environmental Economics and Management

Ricci, Luca
Economic Geography and Comparative Advantage, European Economic Review

Rother, Philipp C.
Money Demand in the West African Economic and Monetary Union: the Problems of Aggregation, Journal of African Economies

Spilimbergo, Antonio
Labor Market Integration, Unemployment and Transfers, Review of International Economics

Spilimbergo, Antonio; Londoño, Juan Luis; Székely, Miguel
Income Distribution, Factor Endowments, and Trade Openness, Journal of Development Economics

Tanzi, Vito
Uses and Abuses of Estimates of the Underground Economy, Economic Journal

Tanzi, Vito
Fiscalité et Architecture du Système Économique International, Reflets et Perspectives de la Vie Economique

Tanzi, Vito
El Impacto de la Globilización Economíca en la Tributación, Boletin Impostivo

Ubide, Angel
International Transmission of Shocks in a Business-Cycle Model under Imperfect Competition, Macroeconomic Dynamics

Van Rijckeghem, Caroline
Albania's Early Transition 1991–93: What Administrative Data Tell Us About Income Distribution and Poverty, Economic Systems  

Other External Publications: including Books, Conference Volumes

Al-Atrash, Hassan; Havrylyshyn, Oleh
Geographic Diversification of Trade in Transition Countries, Balance of Payments, Exchange Rate and Competitiveness in Transition Economies, Mario I. Bléjer and Marko S´kreb, eds., Kluwer Academic Publishers

Auerbach, Alan J.; Braz, Jose; Kotlikoff, Laurence J.; Macedo, Jorge De; Walliser, Jan
Generational Accounting in Portugal, Generational Accounting around the World, ed. by Alan J. Auerbach, Laurence J. Kotlikoff, and Willi Leibfritz, University of Chicago Press, Chicago

Blejer, Mario
Public Debt Management and Monetary Policy: Macroeconomic and Institutional Interactions, European Union Accession: The Challenges for Public Liability Management in Central Europe, World Bank, Washington.

Blejer, Mario; Skreb, Marko (editors)
Financial Sector Transformation: Lessons from Transition Economies, Cambridge University Press

Blejer, Mario; Skreb, Marko (editors)
Major Issues in Central Banking, Monetary Policies, and Implications for Transition Economies, Kluwer Academic Publishers

Blejer, Mario; Skreb, Marko (editors)
Balance of Payments, Exchange Rate, and Competiveness in Transition Economies, Kluwer Academic Publishers

Bogetic, Zeljko; Hanke, Steve H.
The Montenegrin Marka: A Currency Board Approach to Monetary Reform in Montenegro, Antena M & Mermont. (in English and Serbo-Croatian); Podgorica, Montenegro.

Clark, Peter; MacDonald, Ronald
Exchange Rates and Economic Fundamentals: A Methodological Comparison of BEERs and FEERs, Equilibrium Exchange Rates, Ronald MacDonald and Jerome Stein, editors; Kluwer Academic Publishers (Norwell, Massachusetts).

Cordella, Tito; Minelli, E.; Polemarchakis, H.
Trade and Welfare, Markets, Information and Uncertainty: Essays in Economic Theory in Honor of K. Arrow, G. Chichilinsky ed., Cambridge University Press, Mass.

de Mello, Luiz
Fiscal Federalism and Macroeconomic Stability in Brazil: Background and Perspectives, Decentralisation, Inter-governmental Fiscal Relations and Macroeconomic Governance, K. Fukasaku and L. de Mello, eds. (Paris: OECD).

de Mello, Luiz; Fukasaku, K.
Decentralisation, Inter-governmental Fiscal Relations and Macroeconomic Governance, Paris: OECD

Demirgüç-Kunt, A.; Detragiache, Enrica
Financial Liberalization and Financial Fragility, Proceedings of the 10th World Bank Annual Conference on Development Economics, Washington, DC. B. Pleskovic and J.E. Stiglitz (Eds.)

Edison, Hali; Fernald, John; Loungani, Prakash
Was China the First Domino? Assessing Links between China and Other Asian Economies, Journal of International Money and Finance

Eichengreen, Barry; Masson, Paul; Savastano, Miguel; Sharma, Sunil
Transition Strategies and Nominal Anchors on the Road to Greater Exchange-Rate Flexibility, Princeton Essays in International Finance

Eliasson, Ann-Charlotte; Isard, Peter; Laxton, Douglas
Simple Monetary Policy Rules Under Model Uncertainty, International Finance and Financial Crises: Essays in Honor of Robert P. Flood, Jr., Peter Isard, Assaf Razin, and Andrew K. Rose (eds.) (Washington: IMF and Boston: Kluwer)

Hamid, Faruqee; Isard, Peter; Masson, Paul
A Macroeconomic Balance Framework for Estimating Equilibrium Exchange Rates,, Equilibrium Exchange Rates Ronald MacDonald and Jerome Stein, eds., (Boston: Kluwer)

Haque, N. U.; Pesaran, M. H.; Sharma, Sunil
Neglected Heterogeneity and Dynamics in Cross-Country Savings Regressions, Panel Data Econometrics: Future Directions, Papers in Honour of Professor Balestra, ed. J. Krishnakumar and E. Ronchetti, North Holland, Amsterdam.

Havrylyshyn, Oleh; Izvorski, Ivailo; Rooden, Ron van
Growth in Transition Economies 1990–97: An Econometric Analysis with Application to Ukraine, Ukraine at the Crossroads, Axel Siedenberg and Lutz Hoffmann, (eds.), Heidelberg: Springer Verlag

Huang, Haizhou; Xu, Chenggang
Financial Institutions and the Financial Crisis in East Asia, European Economic Review, Papers and Proceedings

Huang, Haizhou; Xu, Chenggang
Institutions, Innovations and Growth, American Economic Review, Papers and Proceedings

Izquierdo, Mario; Ley, Eduardo; Ruiz-Castillo, Javier
La Medición de la Inflación en España, ("The Measurement of Spanish Inflation"), Book published by la Caixa, Barcelona.

Keen, Michael
Aspects of Harmful Tax Competition, M. Bordignon and D. de Empoli (eds). Concorrenza Fiscale in un'Economia Integrata. Franco Angeli, Milan

Kochhar, Kalpana; Loungani, Prakash; Stone, Mark
The East Asian Crisis: Macroeconomic Developments and Policy Lessons, Asian Economic Crisis: Causes, Consequences and Policy Lessons United Nations, ESCAP, Development Papers No. 20 (New York)

Lee, Jaewoo
Investment and Capital Productivity in Europe and the US, Investment, Growth, and Employment: Perspectives for Policy, edited by Ciaran Driver and Paul Temple, Routledge.

Loungani, Prakash; Shaghil, Ahmed
Ciclos economicos en economias de mercado emergentes. (Business Cycles in Emerging Market Economies), Monetaria

Ma, Henry
Inflacion, incertidumbre y crecimiento en Colombia, CEMLA Boletin

Masson, Paul
Contagion: Monsoonal Effects, Spillovers and Jumps Between Multiple Equilibria, The Asian Financial Crises: Causes, Contagion and Consequences (edited by Pierre Richard Agénor, Marcus Miller, David Vines, and Axel Weber) (Cambridge: Cambridge University Press)

McCarthy, Margaret; Wang, Qing; Weiling, Jeffrey F.
The Benefits and Costs of Trade Liberalization on the U.S. Economy: an Industry Analysis, The US Manufacturers Alliance/MAPI Special Report, November 1999

Milesi-Ferretti, Gian Maria; Razin, Assaf
Current Account Deficits and Capital Flows in East Asia and Latin America: Are the Early Nineties Different from the Early Eighties?, Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice and Policy Issues, edited by Takatoshi Ito and Anne Krueger, Un. of Chicago Press for NBER.

Mussa, Michael
Changing Growth Patterns in the World Economy, Creating an Environment for Growth, ed. by Brigitta Swedenborg and Hans Tson Söderström, Center for Business and Policy Studies conference volume.

Mussa, Michael
Moral Hazard, The Asian Financial Crisis: Origins, Implications, and Solutions, ed. by William C. Hunter, George G. Kaufman, and Thomas H. Krueger (Kluwer Academic Publishers)

Olters, Jan-Peter
The Unfriendly Competitiveness Whip, World Economic Affairs

Olters, Jan-Peter
Dawn of the Double e$ Standard, World Economic Affairs

Prati, Alessandro; Schinasi, Garry
Financial Stability in European Economic and Monetary Union, Princeton Studies in International Finance

Raffelhüschen, Bernd; Walliser, Jan
Unification and Aging in Germany: Who Pays and When?, Generational Accounting around the World, ed.by Alan J. Auerbach, Laurence J. Kotlikoff, and Willi Leibfritz, University of Chicago Press, Chicago.

Tanzi, Vito; Zee, Howell
Taxation in a Borderless World: The Role of Information Exchange, International Studies in Taxation: Law and Economics, edited by G. Lindencrona, S. Lodin, and B. Wiman (London: Kluwer Law International). Also in International Tax Review, Vol. 28 (2000) pp.58–63

Van Rijckeghem, Caroline
The Political Economy of Inflation: Are Turkish Banks Potential Losers from Stabilization?, Istanbul Stock Exchange Review

Walliser, Jan
Would Saving Social Security Raise National Saving?, National Tax Journal

A Full and updated listing of external publications of IMF staff (from 1997 onwards), including forthcoming publications, can be found in a searchable database at Research at the IMF website: http://www.imf.org/research.

Visiting Scholars at the IMF, January–March 2000

Barr, Nicholas; London School of Economics, U.K.
Binder, Michael; University of Maryland
Bleaney, Michael; University of Nottingham, U.K.
Bordo, Michael; Rutgers University
Branson, William; Princeton University
Brosio, Giorgio; University of Torino, Italy
Chete, Louis; Nigerian Institute of Social and Economic Research, Nigeria
Corbo, Vittorio; Pontificia Universidad Catolica de Chile, Chile
Dooley, Michael; University of California, Santa Cruz
Eichengreen, Barry; University of California, Berkeley
Feltenstein, Andrew; Virginia Polytechnic Institute
Funke, Michael; Universitat Hamburg, Germany
Garibaldi, Pietro; Universita Commerciale Luigi Bocconi, Italy
Goodfriend, Marvin; Federal Reserve Bank of Richmond
Iwata, Shigeru; University of Kansas
Iyoha, Milton; University of Benin, Nigeria
Keane, Michael; New York University
Kehoe, Patrick; University of Pennsylvania
Khan, Mahmood; Simon Fraser University, Canada
Kolodko, Grzegorz; Warsaw School of Economics, Poland
Lahiri, Kajal; State University of New York, Albany
Mariara, Jane; University of Nairobi, Kenya
Montiel, Peter; Williams College
Osei, Kofi; University of Ghana, Ghana
Scott, Alasdair; Reserve Bank of New Zealand, New Zealand
Sussman, Nathan; Hebrew University, Israel
Weder, Beatrice; University of Basel, Switzerland
Wihlborg, Clas; University of Goteborg, Sweden
Zahler, Roberto; Zahler & Co., Chile,

Editor's Note

The IMF is primarily a policy institution. As a basis for its policy work, however, a significant amount of background research and analytical work is done in various departments at the IMF. Much of this research is original work while some of it is synthetic and draws mainly on work done outside the institution.

This quarterly bulletin will selectively summarize key components of both types of research done at the IMF and will also provide a listing of research documents and other research-related activities, including IMF conferences and seminars. Most of this information is publicly available on the IMF's website and relevant links are indicated below.

I hope that this bulletin will serve as a useful summary guide to research done at the IMF on various topics and also provide a better perspective on the analytical underpinnings of the Fund's operational work.
--Eswar Prasad  

Work in Progress

The IMF maintains a list of analytical and research projects in progress in various departments at the Fund. The list is updated periodically and is organized by department. Since the projects represent work in progress, drafts of papers are generally not available. Nevertheless, the list provides a glimpse into research currently underway at the Fund on a variety of topics. This list can be found at the Research at the IMF website (http://www.imf.org/research) under the title "Ongoing Research Projects."

Journal Description and Subscription Request

The IMF Research Bulletin is a quarterly publication in English and is available free of cost. Material from the bulletin may be reprinted with proper attribution. Editorial correspondence may be addressed to The Editor, IMF Research Bulletin, IMF, Room 10–548, Washington, DC 20431 U.S.A. or e-mailed to resbulletin@imf.org. Subscription requests should be addressed to Publication Services, Box X2000, IMF, Washington, DC 20431 U.S.A.; e-mail: publications@imf.org.