Ernesto Stein

• Inter-American Development Bank

En este capítulo desarrollamos los casos de las empresas Camposol (Perú), Citrusvil (Argentina) y Kekén (México).

Thirty years after the region embarked on large-scale liberalization, trade policy could have been expected to become all but irrelevant. Instead, a mismatch between expectations and what could realistically be delivered set the stage for disappointment, skepticism, and fatigue over trade policy in the region Liberalization made most countries bett...

Export Pioneers in Latin America analyzes a series of case studies of successful new export activities throughout the region to learn how pioneers jump-start a virtuous process leading to economic transformation. The cases of blueberries in Argentina, avocados in Mexico, and aircraft in Brazil illustrate how an initially successful export activity...

Government intervention in the construction sector as a way to boost the economy has been a constant in Colombia for the past 90 years. This paper explicitly tests the impact of the most recent of such interventions: a subsidy to the mortgage interest rate. The results show that the subsidy boosted mortgage loans by around 38 percent. However, it i...

In the past thirty years, democratic freedom and competitive electoral processes have taken hold as never before in Latin America. This document zeroes in (by way of summarizing the results of nine detailed studies developed by field experts) on the intricate workings of democratic institutions, the actors that participate in democratic systems, an...

¿Qué determina la capacidad de los países para diseñar, aprobar e implementar políticas públicas efectivas? Para abordar esta pregunta, este libro analiza el proceso de formulación de políticas en ocho países latinoamericanos en base a una metodología común con fundamentos en la teoría de juegos y el análisis institucional. Este análisis sistemátic...

Over the past 30 years, democratic freedoms and competitive electoral processes have taken hold as never before in Latin America. How Democracy Works takes a detailed look, from an institutional perspective, at each of the main actors on the policymaking stage in Latin America, emphasizing the extent to which institutions facilitate or hinder inter...

I study a budget-constrained, private-valuation, sealed-bid sequential auction with two incompletely-informed, risk-neutral bidders in which the valuations and income may be non-monotonic functions of a bidder's type. Multiple equilibrium symmetric bidding functions may exist that differ in allocation, efficiency and revenue. The sequence of sale a...

This document presents a new framework for the the study of the political economy of the budget process building on the very profuse available literature on budget processes, fiscal policy, and institutions in Latin America. It adds emphasis to the role of actors, the role of the budget process as facilitator of exchanges in the policymaking proces...

This book is a breakthrough in the application of institutional economics to budgeting and public expenditure decisions. It is truly comparative in scope and probes beneath the formal rules of budgeting to determine how the process actually works. The studies published in this volume focus on Latin America, a region in which informality dominates p...

This document reviews the evidence from ten countries studies that look in detail at the political economy of the budget process. It concentrates on reviewing the evidence on the role of fiscal institutions and the relationship among different acotrs over the many stages of the process. It ends by providing recommendations for the implementation of...

While economists have tended to focus on specific public policies when developing recommendations, the achievement of welfare objectives might depend more on the quality of policies than their content. This paper develops several measures of the qualities of policies across countries, arguing that the quality of public policies depends on each poli...

I study a budget-constrained, private-valuation, sealed-bid sequential auction with two incompletely-informed, risk-neutral bidders in which the valuations and income may be non-monotonic functions of a bidder's type. Multiple equilibrium symmetric bidding functions may exist that differ in allocation, efficiency and revenue. The sequence of sale a...

La teoría del "jugador con poder de veto" sostiene que un mayor número de jugadores con poder de veto disminuye las probabilidades de cambio; por su parte, las políticas estables ayudan a mantener los compromisos pero pueden limitar la capacidad de adaptación ante circunstancias cambiantes. Este estudio cuestiona esta aserción, argumentando que la...

What determines the capacity of countries to design, approve, and implement effective public policies? To address this question, this book builds on the results of case studies of political institutions, policymaking processes, and policy outcomes in eight Latin American countries, structured around a common methodology with foundations in game the...

I study a budget-constrained, private-valuation, sealed-bid sequential auction with two incompletely-informed, risk-neutral bidders in which the valuations and income may be non-monotonic functions of a bidder's type. Multiple equilibrium symmetric bidding functions may exist that differ in allocation, efficiency and revenue. The sequence of sale a...

Using bilateral foreign direct investment (FDI) data, we find that differences in time zones have a negative and significant effect on the location of FDI. We show that this finding is robust across different specifications, estimation methods and proxies for time zone differences. Time zones also have a negative effect on trade, but this effect is...

Using bilateral foreign direct investment (FDI) stocks around the world, we explore the importance of a wide range of institutional variables as determinants of the location of FDI. While we find that better institutions have overall a positive and economically significant effect on FDI, some institutional aspects matter more than others do. Especi...

This study is concerned with Foreign Direct Investment (FDI) and economic growth across the world for the period 1991?2001. This article produces fresh empirical evidence on the relation between FDI and economic growth obtained from single-equation and simultaneous-equation estimates for 140 countries using macroeconomic variables. The results indi...

While policymaking processes have a strong impact on policy outcomes, policy outcomes and policy reforms can have a significant impact on the PMP. Thus there are important feedback effects between the PMP and policy outcomes. This document studies the impact of fiscal reforms on the policymaking process, particularly, decentralization and budgetary...

Incl. bibl.

This paper studies Latin American exchange rate regimes since 1960. We model government exchange rate regime choice, constrained by politics. The model implies that the larger the tradable sectors exposed to international competition, the less likely is the maintenance of a fixed exchange rate regime. It also implies that the probability of the mai...

We develop the implications of devaluation cycles for real exchange rates in a two-sector small open economy with a cash-in-advance constraint. Policy-makers are office-motivated politicians. Voters have incomplete information on the competence and the opportunism of incumbents. Devaluation acts like a tax, and is politically costly because it can...

The role of regional integration agreements as a determinant of the location of FDI has become an increasingly relevant issue for emerging economies. In Latin America, the largest effects are likely to be associated with the Free Trade Area of the Americas (FTAA). In this regard, there are a number of highly relevant questions: For instance, what e...

In this paper we estimate the early effect of the European Monetary Union (EMU) on trade and its possible effects on the UK. We use a panel data set that includes the most recent information on bilateral trade for 22 developed countries from 1992 through 2001. After 1999, 12 European countries formally entered into a currency union. Controlling for...

This article presents a new data set on electoral systems and outlines its potential uses in research on the links between electoral systems and economic outcomes. The data measure the extent to which politicians can advance their careers by appealing to narrow geographic constituencies on the one hand or party constituencies on the other

Este documento evalúa si los resultados de Rodrik (1999) de que las instituciones para el manejo de conflictos están asociadas con la capacidad de reaccionar ante los choques económicos son robustos a diferentes formas de definir la calidad de tales instituciones. En este documento, medimos la calidad de las instituciones de gestión de conflictos c...

This paper presents a rational political budget cycle model where devaluation acts as a tax on consumption due to a cash-in-advance constraint. Competent governments can signal their competency by reducing the rate of devaluation prior to elections. When voters also ignore the degree to which governments are opportunistic, i.e. the extent to which...

Standard real business cycle models must rely on total factor productivity (TFP) shocks to explain the observed comovement of consumption, investment, and hours worked. This paper shows that a neoclassical model consistent with observed heterogeneity in labor supply and consumption can generate comovement in the absence of TFP shocks. Intertemporal...

(Disponible en idioma inglés únicamente) En este trabajo calculamos los efectos iniciales de la Unión Monetaria Europea (UME) en el comercio internacional. Empleamos un conjunto de datos de panel que incluye la información más actualizada sobre el comercio internacional de 22 países desarrollados, desde 1992 hasta 2002. Durante ese período, 12 país...

(Disponible en idioma inglés únicamente) El papel de los acuerdos de integración regional como factor determinante de la ubicación de la inversión extranjera directa (IED) se ha ido convirtiendo en un problema cada vez más importante para las economías en desarrollo. En América Latina, es probable que los mayores efectos guarden relación con el Acu...

(Disponible en idioma inglés únicamente) En este trabajo se analizan los efectos de los acuerdos de integración regional en el destino de la inversión extranjera directa, empleándose para ello datos del volumen de inversión extranjera bilateral directa tomados de las Estadísticas sobre inversión internacional directa de la OCDE. El conjunto de dato...

This paper studies the impact of regional integration agreements (RIAs) on the location of foreign direct investment (FDI), using data on bilateral outward FDI stocks from the OECD International Direct Investment Statistics. The dataset covers FDI from 20 source countries, all of them from the OECD, to 60 host countries, from 1982 through 1999. Usi...

Variables into Political Variables and Institutions: Links (5), (6) and (7) in Figure 3 The elements listed in the last paragraph of the previous section provide some guidance with which to enter into the observation of actual polities. A couple of comments are in order at this point. First, the listing we provide is meant to be suggestive, and not...

(Disponible en idioma inglés únicamente) En este trabajo analizamos la manera en que los ciclos económico y de tasas de interés en países desarrollados inciden en la inversión extranjera directa (IED) destinada a los países en desarrollo. Después de agregar los flujos en tres grandes áreas de origen (Estados Unidos, Europa y Japón), hallamos que lo...

Trade effect The euro’s trade impact is clearly important for the nations that have already joined euroland. But the size and nature of the trade effects are even more important for the EU members who have not joined the euro: the UK, Denmark, Sweden and the ten new nations scheduled to join next year. What are they missing? Will they face trade di...

This article presents a new data set on electoral systems and outlines its potential uses in research on the links between electoral systems and economic outcomes. The data measure the extent to which politicians can advance their careers by appealing to narrow geographic constituencies on the one hand or party constituencies on the other. Copyrigh...

Trade intensity increases the business cycle co-movement among industrial countries. Using annual information for 147 countries for the period 1960–99 we find that the impact of trade intensity on business cycle correlation among developing countries is positive and significant, but substantially smaller than that among industrial countries. Our fi...

(Disponible en idioma ingl�s �nicamente) Algunos criterios claves de la obra publicada sobre la zona monetaria �ptima son que los pa�ses deben sumarse a una uni�n monetaria para poder establecer lazos comerciales internacionales m�s estrechos y ciclos econ�micos m�s sim�tricos. Pero ambos criterios son end�genos. Frankel y Rose (1998) hallan que la...

This presentation discusses the effects of the Free Trade Area of the Americas (FTAA) on foreign direct investment (FDI). In particular, the inflow of FDI from the United States and Canada towards Latin American countries is discussed along with an analysis of the role of regional integration variables (RIAs). This document was presented by the Tra...

Theoretical and empirical analysis of de jure dollarization. With the persistent instability of international financial markets, emerging economies are exploring new ways to reduce exposure to capital flow volatility. Some analysts argue that financially open economies are best served by more flexible regimes, while others argue in favor of extreme...

An overview of the financial vulnerability of emerging market economies and how the impact of exchange rate regimes affects this vulnerability. The 1994-1995 Mexican crisis was the first in a succession of financial crises to hit emerging markets in Thailand, Indonesia, Malaysia, South Korea, Russia, Brazil, Argentina, and Turkey. In almost all the...

Abstract: This paper presents a new data set on electoral systems and outlines its potential uses in further research exploring the connections between electoral systems and economic outcomes. The data set provides indicators of the degree to which individual politicians can further their careers by appealing to narrow geographic constituencies on...

Financial services with global reach are a highly information-intensive business. In it, the ability to deliver reliable price formation, global liquidity, and network benefits is increasingly critical for the choice of currency denomination. Conversely, the exchange value and prospective usefulness of small currencies becomes less certain, and tra...

(Disponible en idioma inglés únicamente) En este trabajo se presenta un nuevo conjunto de datos sobre sistemas electorales y se bosqueja sus usos potenciales en nuevas investigaciones sobre las conexiones entre los sistemas electorales y los resultados económicos. El conjunto de datos brinda indicadores del grado al que políticos individuales puede...

Tomohara for their excellent work as research assistants. We gratefully ackowledge the contributions of Gustavo Márquez on all aspects related to labor market and migration. The ideas expressed in this paper are those of the authors, and do not necessarily reflect those of the Inter-American Development Bank. Assessing Dollarization: An Application...

estudios/dtbc. Existe la posibilidad de solicitar una copia impresa con un costo de $500 si es dentro de Chile y US$12 si es para fuera de Chile. Las solicitudes se pueden hacer por fax: (56-2) 6702231 o a través de correo electrónico: bcch@bcentral.cl.studies/workingpaper. Printed versions can be ordered individually for US$12 per copy (for orders...

This paper discusses dollarization from the perspective of the relation between country and devaluation risk. In the absence of balance sheet effects, we find that a full dollarization of an economy increases its country risk. On the other hand, when balance sheet effects are present, the full dollarization could reduce country risk. The link betwe...

Countries that are classified as having floating exchange rate systems (or very wide bands) show strikingly different patterns of behavior. They hold very different levels of international reserves and allow very different volatilities to the movements of the exchange rate relative to the volatility that they tolerate either on the level of reserve...

In this paper we consider a set countries with a de jure floating exchange rate and show that there are substantial differences in their exchange rate policies. In particular, we explore how the ability to borrow in own currency and the degree of passthrough from exchange rate to prices affect the degree of exchange rate management. We find strong...

This paper explores the impact of political economy factors on exchange rate policy in Latin America. It studies the determinants of the choice of exchange rate regime in Latin America, placing special emphasis on political, institutional and interest group explanations. The presumption is that differences in institutional and political settings, a...

Abstract One of the most notorious features of the trend toward globalization in recent times has been the increased importance of foreign direct investment around the world. In this paper, we study the determinants of location of FDI, using an OECD dataset on bilateral FDI stocks between 18 source countries and 58 host countries, in the context of...

This book analyzes the political economy of exchange rate policy in Latin America. It brings together the work of economists and political scientists interested in the interaction of economic and political factors in the development of exchange rate policy.

Exchange rates have been central to the course of economic development in Latin America for decades. From the heyday of import substitution in the 1960s to the rapid expansion of foreign debt in the 1970s, from the debt crisis and its troubled aftermath in the 1980s to the rekindling of growth and borrowing in the 1990s, the exchange rate has been...

In this paper we collect detailed information on the budget institutions of Latin American countries. We classify these institutions on a "hierarchical"/"collegial" scale, as a function of the existence of constraints on the deficit, and voting rules. We show that "hierarchical" and transparent procedures have been associated with more fiscal disci...

this paper are not necessarily shared by the Inter-American Development Bank.

this paper. Arnaldo Posadas provided excellent research assistance. NOTE FROM THE AUTHORS: Unfortunately at the present moment, we do not have this document=s graphics and tables available in electronic form. Please check later with us for future availability on PDF, or send a request to OCE@iadb.org for a free printed copy of this document. Please...

(Disponible en idioma inglés únicamente) Los países que tienen lo que se considera como regímenes de cambio flotante (o de bandas muy amplias) muestran patrones notablemente diferentes de conducta. Mantienen niveles sumamente distintos de reservas internacionales y permiten niveles de inestabilidad en cuanto a las fluctuaciones del tipo de cambio m...

This paper tests whether Rodrik’s (1999) results that institutions for conflict management are associated with the ability to react to economic shocks are robust to different ways of defining the quality of such institutions. In this paper, we measure the quality of conflict management institutions with two different indices. The first is an index...

In this paper, we use a panel approach to study population growth in major cities around the world. We find that major cities grow faster in relatively backward economies and in more volatile, faster-growing economies. We also find that the effects of trade policy on the growth of major cities hinge heavily on geography. While population growth in...

This paper tests whether Rodrik's (1999) results that institutions for conflict management are associated with the ability to react to economic shocks are robust to different ways of defining the quality of such institutions. We measure the quality of conflict management institutions with two different indices. The first is an index of political co...

this paper, we explore whether political economy factors have been important determinants of exchange rate policy in Latin America. One way in which we do this is by studying the determinants of the choice of exchange rate regime in Latin America, placing special emphasis on political, institutional and interest group explanations. The presumption...

We test the extent to which growth in the 11 CIS countries (excluding Russia) was associated with developments in Russia, overall, as well as through the trade, financial and remittance channels over the last decade or so. The results point to the continued existence of economic links between the CIS countries and Russia, though these links may hav...

(Disponible en idioma ingl�s �nicamente) En este trabajo se pone a prueba si los resultados de Rodrik (1999) de que las instituciones de manejo de conflictos se relacionan con la capacidad de reaccionar a sacudidas econ�micas son valederos ante maneras distintas de definir la calidad de tales instituciones. Cuantificamos la calidad de las instituci...

(Disponible en idioma inglés únicamente) En este trabajo se presenta un modelo de ciclo político presupuestario racional para una economía abierta en el que las devaluaciones se demoran en el período preelectoral, a fin de aumentar las probabilidades electorales del partido oficialista. Los modelos de ciclos políticos anteriores, al concentrarse en...

>p>This article examines the economic aspects of European Union (EU) policy toward its eastern neighbors in the Commonwealth of Independent States (CIS). This region was long considered less important for the EU in comparison with Central and Eastern Europe, which was the subject of farreaching economic and political integration during the two EU e...

This paper contributes empirically to our understanding of informed traders. It analyzes traders' characteristics in a foreign exchange electronic limit order market via anonymous trader identities. We use six indicators of informed trading in a cross-sectional multivariate approach to identify traders with high price impact. More information is co...

(Disponible en idioma inglés únicamente) En este trabajo se presenta información detallada sobre las instituciones presupuestarias de países latinoamericanos. Esas instituciones se clasifican según una escala jerárquica/colegiada, como función de la existencia de factores limitantes de déficit y las reglas de votación.

Economics In this paper, we collect detailed information on the budget institutions of Latin American countries. We classify these institutions on a "hierarchical"/"collegial" scale, as a function of the existence of constraints on the deficit, and voting rules. We show that "hierarchical" and transparent procedures have been associated with more f...

This paper explores the links between institutional arrangements and fiscal performance in" Latin America. We consider four measures of fiscal performance, namely expenditures, the size of fiscal deficits and debt, and the response of fiscal policy to business" fluctuations; and two institutional dimensions, namely, electoral systems and budgetary...

This paper summarizes recent research by the authors on the effects of free trade areas (FTAs). Within our model, which emphasizes inter-continental transport costs, several conclusions arise. (1) FTAs are likely to be detrimental over a moderate range of parameter values, even if drawn along natural regional lines. (2) A small margin of preference...

Is skill dispersion a source of comparative advantage? While it is established that a country's aggregate endowment of human capital is an important determinant of comparative advantage, this paper investigates whether the distribution of skills in the labor force can play a role in the determination of trade flows. We develop a multi-country, mult...

High inflation economies often do not exhibit smooth inflationary processes, but rather stop-go cycles. This paper relates these stop-go episodes of inflation to a political cycle. The government can try to repress inflation until after the elections in order to increase the chances of being reelected. It is modeled as a two-period game of incomple...

High-inflation economies often exhibit stop–go cycles of inflation, rather than smooth inflationary processes. This paper relates these stop–go episodes of inflation to a political cycle: the government can try to repress inflation until after the elections in order to increase the chances of being reelected. This is modeled as a two-period game of...

Is world trade becoming more regionalized, as a result of preferential arrangements such as NAFTA, the Andean Pact and MERCOSUR? If so, is this deviation from the principle of MFN (non-discriminatory trade policies) good or bad? This paper attempts to answer both questions.Using the gravity model to examine bilateral trade patterns throughout the w...

Using the gravity model, we find evidence of three continental trading blocs: the Americas, Europe and Pacific Asia. Intra-regional trade exceeds what can be explained by the proximity of a pair of countries, their sizes and GNP/capitas, and whether they share a common border or language. We then turn from the econometrics to the economic welfare i...

This paper presents an approach to study the effects of political institutions on policies, which puts emphasis on the intertemporal nature of policymaking. We argue that viewing political institutions from the perspective of their effects on intertemporal interactions and intertemporal cooperation can lead to predictions different from those emerg...