Inflation, currency substitution and dollarization: The case of Argentina

This dissertation discusses the relationship between inflation, currency substitution and dollarization that has taken place in Argentina for the past several decades.^ First, it is shown that when consumers are able to hold only domestic monetary balances (without capital mobility) an increase in the rate of inflation will produce a balance of payments deficit. We then look at the same issue but with heterogeneous consumers, this heterogeneity being generated by non-proportional lump-sum transfers.^ Second, we discussed some necessary assumptions related to currency substitution models and concluded that there was no a-priori conclusion on whether currencies should be assumed to be "cooperant" or "non-cooperant" in utility. That is to say, whether individuals held different currencies together or one instead of the other.^ Third, we went into discussing the issue of currency substitution as being a constraint on governments' inflationary objectives rather than a choice of those governments to avoid hyperinflations. We showed that imperfect substitutability between currencies does not "reduce the scope for rational (hyper)inflationary processes" as it had been previously argued. It will ultimately depend on the parametrization used and not on the intrinsic characteristics of imperfect substitutability between currencies.^ We further showed that in Argentina, individuals have been able to endogenize the money supply by holding foreign monetary balances. We argued that the decision to hold foreign monetary balances by individuals is always a second best due to the trade-off between holding foreign monetary balances and consumption. For some levels of income, consumption, and foreign inflation, individuals would prefer to hold domestic monetary balances rather than foreign ones.^ We then modeled the distinction between dollarization and currency substitution. We concluded that although dollarization is necessary for currency substitution to take place, the decision to use foreign monetary balances for transactions purposes is largely independent from the dollarization process.^ Finally, we concluded that Argentina should not fully dollarize its economy because dollarization is always a second best to using a domestic currency. Further, we argued that a fixed exchange system would be better than a flexible exchange rate or a "crawling-peg" system because of the characteristics of the political system and the possibilities of "mass praetorianism" to develop, which is intricately linked to "populist" solutions. ^

Historical analysis of two contemporary issues at the International Community School of Abidjan, Cote d'Ivoire: Local -hired and overseas -hired teacher relationships. Community perceptions of the U.S. Embassy at ICSA

This study was a qualitative investigation to ascertain and describe two of the current issues at the International Community School of Abidjan, examine their historical bases, and analyze their impact on the school environment.^ Two issues emerged during the inquiry phase of this study: (1) the relationship between local-hired and overseas-hired teachers in light of the January 1994 devaluation which polarized the staff by negating a four-year salary scale that established equity, (2) the school community's wide variance in the perceived power that the U.S. Embassy has on school operations based on its role as ICSA's founding sponsor.^ A multiple studies approach was used in gathering data. An extensive examination of the school's archives was used to reconstruct an historical overview of ICSA. An initial questionnaire was distributed to teachers and administrators at an educational conference to determine the scope of the 1994 devaluation of the West and Central African CFA and its impact on school personnel in West African American-sponsored overseas schools (ASOS). Personal interviews were conducted with the school staff, administration, school board members, and relevant historical participants to determine the principal issues at ICSA at that time. The researcher, an overseas-hired teacher, also used participant observations to collect data. Findings based on these sources were used to analyze the two issues from an historical perspective and to form conclusions.^ Findings in this study pertaining to the events induced by the French and African governments' decision to implement a currency devaluation in January 1994 were presented in ex post-facto chronological narrative form to describe the events which transpired, describe the perception of school personnel involved in these events, examine the final resolution and interpret these events within a historical framework for analysis.^ The topic of the U.S. Embassy and its role at ICSA emerged inductively from open-ended personal interviews conducted over the course of a year. Contradictory perspectives were examined and researched for accuracy and cause. The results of this inquiry presented the U.S. Embassy role at ICSA from a two-sided perspective, examined the historical role of the Embassy, and presented means by which the role and responsibility of the U.S. Embassy could best be communicated to the school community.^ The final chapter provides specific actions for mediation of problems stemming from these issues, implications for administrators and teachers currently involved in overseas schools or considering the possibility, and suggestions for future inquiries.^ Examination of a two-tier salary scale for local-hired and overseas-hired teachers generated the following recommendations: movement towards a single salary scale when feasible, clearly stated personnel policies and full disclosure of benefits, a uniform certification standard, professional development programs and awareness of the impact of this issue on staff morale.^ Divergent perceptions and attitudes toward the role of the U.S. Embassy produced these recommendations: a view towards limiting the number of Americans on ASOS school boards, open school board meetings, selection of Embassy Administrative Officers who can educate school communities on the exact role of the Embassy, educating parents through the outreach activities that communicate American educational philosophy and involve all segments of the international community, and a firm effort on the part of the ASOS to establish the school's autonomy from special interests. ^

Inflation, currency substitution, and dollarization : the case of Argentina

This dissertation discusses the relationship between inflation, currency substitution and dollarization that has taken place in Argentina for the past several decades. First, it is shown that when consumers are able to hold only domestic monetary balances (without capital mobility) an increase in the rate of inflation will produce a balance of payments deficit. We then look at the same issue but with heterogeneous consumers, this heterogeneity being generated by non-proportional lump-sum transfers. Second, we discussed some necessary assumptions related to currency substitution models and concluded that there was no a-priori conclusion on whether currencies should be assumed to be "cooperant" or "non-cooperant" in utility. That is to say, whether individuals held different currencies together or one instead of the other. Third, we went into discussing the issue of currency substitution as being a constraint on governments inflationary objectives rather than a choice of those governments to avoid hyperinflations. We showed that imperfect substitutability between currencies does not "reduce the scope for rational (hyper)inflationary processes" as it had been previously argued. It will ultimately depend on the parametrization used and not on the intrinsic characteristics of imperfect substitutability between currencies. We further showed that in Argentina, individuals have been able to endogenize the money supply by holding foreign monetary balances. We argued that the decision to hold foreign monetary balances by individuals is always a second best due to the trade-off between holding foreign monetary balances and consumption. For some levels of income, consumption, and foreign inflation, individuals would prefer to hold domestic monetary balances rather than foreign ones. We then modeled the distinction between dollarization and currency substitution. We concluded that although dollarization is necessary for currency substitution to take place, the decision to use foreign monetary balances for transactions purposes is largely independent from the dollarization process. Finally, we concluded that Argentina should not fully dollarize its economy because dollarization is always a second best to using a domestic currency. Further, we argued that a fixed exchange system would be better than a flexible exchange rate or a "crawling-peg" system because of the characteristics of the political system and the possibilities of "mass praetorianism" to develop, which is intricately linked to "populist" solutions.

The impacts of trade policy reforms on the Sri Lankan economy

This dissertation presents an analysis of the impacts of trade policy reforms in Sri Lanka. A Computable General Equilibrium (CGE) model is constructed with detailed description of the domestic production structure and foreign trade. The model is then used to investigate the effects of trade policy reforms on resource allocation and welfare.^ Prior to 1977, Sri Lanka maintained stringent control over its imports through rigid quantitative restrictions. A new economic policy reform package was introduced in 1977, and it shifted Sri Lanka's development strategy toward an export oriented policy regime. The shift of policy focus from a restrictive trade regime toward a more open trade regime is expected to have a significant impact on the volume of external trade, domestic production structure, allocation of resources, and social welfare.^ Simulations are carried out to assess the effects of three major policy reforms: (1) a devaluation of the Sri Lanka rupee, (2) a partial or a complete elimination of export duties, and (3) a devaluation-cum-removal of export duties.^ Simulation results indicate that the macroeconomic impact of a devaluation-cum-removal of export duties can be substantial. They also suggest that the resource-pull effects of a devaluation and a devaluation-cum-export duty removal policy are significant. However, the model shows that a devaluation combined with an export duty reduction is likely to be a superior strategy. ^

Exchange rate overvaluation under hyperinflation: The case of Peru

This dissertation examines the behavior of the exchange rate under two different scenarios. The first one is characterized by, relatively, low inflation or a situation where prices adjust sluggishly. The second is a high inflation economy where prices respond very rapidly even to unanticipated shocks. In the first one, following a monetary expansion, the exchange rate overshoots, i.e. the nominal exchange rate depreciates at a faster pace than the price level. Under high levels of inflation, prices change faster than the exchange rate so the exchange rate undershoots its long run equilibrium value.^ The standard work in this area, Dornbusch (1976), explains the overshooting process in the context of perfect capital mobility and sluggish adjustment in the goods market. A monetary expansion will make the exchange rate increase beyond its long run equilibrium value. This dissertation expands on Dornbusch's model and provides an analysis of the exchange rate under conditions of currency substitution and price flexibility, characteristics of the Peruvian economy during the hyper inflation process that took place at the end of the 1980's. The results of the modified Dornbusch model reveal that, given a monetary expansion, the change in the price level will be larger than the change in the exchange rate if prices react more than proportionally to the monetary shock.^ We will expect this over-reaction in circumstances of high inflation when the velocity of money is increasing very rapidly. Increasing velocity of money, gives rise to a higher relative price variability which in turn contributes to the appearance of new financial (and also non-financial) instruments that report a higher return than the exchange rate, causing people to switch their demand for foreign exchange to this new assets. In the context of currency substitution, economic agents hoard and use foreign exchange as a store of value. The big decline in output originated by hyper inflation induces people to sell this hoarded money to finance current expenses, increasing the supply of foreign exchange in the market. Both, the decrease in demand and the increase in supply reduce the price of foreign exchange i.e. the real exchange rate. The findings mentioned above are tested using Peruvian data for the period January 1985-July 1990, the results of the econometric estimation confirm our findings in the theoretical model. ^

Speaking Up: A Phenomenological Study of Student Perceptions of Being Silenced in their Higher Education Classrooms

This phenomenological study explored students’ experiences of being silenced in their higher education classroom. Themes emerging from this study include the influence of past experiences, devaluation of students’ previous knowledge and learning, use of communication patterns to silence students, and internalization of conflict and oppression resulting from being silenced.

Correlation of detector dog alerts to cocaine decomposition products found in illicit forensic specimens

The volatile chemicals which comprise the odor of the illicit drug cocaine have been analyzed by adsorption onto activated charcoal followed by solvent elution and GC/MS analysis. A series of field tests have been performed to determine the dominant odor compound to which dogs alert. All of our data to date indicate that the dominant odor is due to the presence of methyl benzoate which is associated with the cocaine, rather than the cocaine itself. When methyl benzoate and cocaine are spiked onto U.S. currency, the threshold level of methyl benzoate required for a canine to signal an alert is typically 1-10 $\mu$g. Humans have been shown to have a sensitivity similar to dogs for methyl benzoate but with poorer selectivity/reliability. The dominant decomposition pathway for cocaine has been evaluated at elevated temperatures (up to 280$\sp\circ$C). Benzoic acid, but no detectable methyl benzoate, is formed. Solvent extraction and SFE were used to study the recovery of cocaine from U.S. currency. The amount of cocaine which could be recovered was found to decrease with time. ^

An evaluation of exchange rate policy and economic adjustment in Nicaragua, 1993--1995

Since the late 1970's, but particularly since the mid-1980s, the economy of Nicaragua has had persistent and large macroeconomic imbalances, while GDP per-capita has declined to 1950s' levels. By the second half of the 1990s, huge fiscal deficits and a reduction of foreign financing resulted in record hyperinflation. The Sandinista government's (1979–1990) harsh stabilization program in 1988–89 had only modest and short-lived success. It was doomed by their inability to lower the public sector deficit due to the war, plus diminishing financial support from abroad. Hyperinflation stopped only after their 1990 electoral defeat ended the war and massive aid began to flow in. Five years later, macroeconomic stability is still very fragile. A sluggish recovery of export agriculture plus import liberalization, have impeded a reduction of huge trade and current account deficits. Facing the prospects of diminished aid flows, the government's strategy has hinged on the achievement of a real devaluation through a crawling-peg adjustment of the nominal rate. However, at the end of 1995 the situation of the external accounts was still critical, and the modest progress achieved was attributable to cyclical terms-of-trade improvement and changes in the political outlook of agricultural producers. Using a Computable General Equilibrium Model and a Social Accounting Matrix constructed for this dissertation, the importance of structural rigidities in production and demand in explaining such outcome is shown. It is shown that under the plausible structural assumptions incorporated in the model, the role of devaluation in the adjustment process is restricted by structural rigidities. Moreover, contrary to the premise of the orthodox economic thinking behind the economic program, it is the contractionary effect of devaluation more than its expenditure-switching effects that provide the basis for is use in solving the external sector's problems. A fixed nominal exchange rate is found to lead to adverse results. The broader conclusion that emerges from the study is that a new social compact and a rapid increase in infrastructure spending plus fiscal support for the traditional agro-export activities is at the center of a successful adjustment towards external viability in Nicaragua. ^