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. ^

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. ^

Pollution generation in the Carajas region of Brazil: An extended input -output approach

The economic development of any region involves some consequences to the environment. The choice of a socially optimal development plan must consider a measure of the strategy's environmental impact. This dissertation tackles this problem by examining environmental impacts of new production activities. The study uses the experience of the Carajás region in the north of Brazil. This region, which prior to the 1960's was an isolated outpost of the Amazon area, was integrated to the rest of the country with a non-sophisticated but strategic road system and eventually became the second largest iron ore mining area in the world. Finally, in the 1980's, the area was linked, by way of a railroad, to the nearest seaport along the Atlantic Ocean. The consequence of such changes was a burst of economic growth along the railroad Corridor and neighboring areas. In this work, a Social Accounting Matrix (SAM) is used to construct a 2-region (Corridor and surrounding area), fixed price, Computable General Equilibrium (CGE) Model to examine the relationship between production and pollution by measuring the different pollution effects of alternative growth strategies. SAMs are a very useful tool to examine the environmental impacts of development by linking production activities to measurable indices of natural resource degradation. The simulation results suggest that the strategies leading to faster economic growth in the short run are also those that lead to faster rates of environmental degradation. The simulations also show that the strategies that leads to faster rates of short run growth do so at the price of a rate of environmental depletion that is unsustainable from a long run perspective. These results, therefore, support the concern expressed by environmental economists and policy makers regarding the possible trade-offs between economic growth and environmental preservation. This stresses the need for a careful analysis of the environmental impacts of alternative growth strategies. ^

The international impact of productivity shocks

Even though many studies have confirmed the Feldstein-Horioka (1980) finding that savings and investment rates are highly correlated, there is no consensus on the major reason for this correlation. The purpose of this dissertation is to develop theoretical models and calibrate and simulate these to compare their implications to explain the observed time-series comovement between savings and investment in an attempt to show that this high correlation may stem from technological shocks.^ The dissertation is comprised of three studies. The first two studies construct overlapping-generations, two-economy models of saving and investment under conditions of perfect international capital mobility. The second study differs from the first by endogenizing the labor supply. Employing simulations, the models are used to generate time-series for savings and investment. These are then compared with the actual data for specific economies. The models show that productivity shocks produce a high correlation between savings and investment. Further, while the model with exogenous labor supply displays monotonic adjustment, the economy with endogenous labor supply adjusts cyclically.^ The third model, on the other hand, constructs a general equilibrium model for a small open economy. The study is based on two important elements: adjustment costs in investment and endogenous, recursive time preferences. Again, the simulation results show that the model generates, at least in a significant part of the adjustment path, a positive correlation between domestic savings and investment in response to a supply shock. ^

Essays in open economy macroeconomics

Research macroeconomists have witnessed remarkable methodological developments in mathematical, statistical, and computational tools during the last two decades. The three essays in this dissertation took advantage of these advances to analyze important macroeconomic issues. ^ The first essay, “ Habit Formation, Adjustments Costs, and International Business Cycle Puzzles” analyzes the extent to which incorporating habit formation and adjustment costs in investment in a one-good two-country general equilibrium model would help overcome some of the international business cycle puzzles. Unlike standard results in the literature, the model generates persistent, cyclical adjustment paths in response to shocks. It also yields positive cross-country correlations in consumption, employment, investment, and output. Cross-country correlations in output are higher than the ones in consumption. This is qualitatively consistent with the stylized facts. These results are particularly striking given the predicted negative correlations in investment, employment, and output that are typically found in the literature. ^ The second essay, “Comparison Utility, Endogenous Time Preference, and Economic Growth,” uses World War II as a natural experiment to analyze the degree to which a model where consumers' preferences exhibit comparison-based utility and endogenous discounting is able to improve upon existing models in mimicking the transitional dynamics of an economy after a shock that destroys part of its capital stock. The model outperforms existing ones in replicating the behavior of the saving rate (both on impact and along the transient paths) after this historical event. This result brings additional support to the endogenous rate of time preference being a crucial element in growth models. ^ The last essay, “Monetary Policy under Fear of Floating: Modeling the Dominican Economy,” presents a small scale macroeconomic model for a country (Dominican Republic) characterized by a strong presence of fear of floating (reluctance to have a flexible exchange rate regime) in the conduct of monetary policy. The dynamic responses of this economy to external shocks that are of interest for monetary policy purposes are analyzed under two alternative interest rate policy rules: One being the standard Taylor rule and another that responds explicitly to deviations of the exchange rate with respect to its long-term trend. ^

Essays on international lending and increasing returns to scale

Standard economic theory suggests that capital should flow from rich countries to poor countries. However, capital has predominantly flowed to rich countries. The three essays in this dissertation attempt to explain this phenomenon. The first two essays suggest theoretical explanations for why capital has not flowed to the poor countries. The third essay empirically tests the theoretical explanations.^ The first essay examines the effects of increasing returns to scale on international lending and borrowing with moral hazard. Introducing increasing returns in a two-country general equilibrium model yields possible multiple equilibria and helps explain the possibility of capital flows from a poor to a rich country. I find that a borrowing country may need to borrow sufficient amounts internationally to reach a minimum investment threshold in order to invest domestically.^ The second essay examines how a poor country may invest in sectors with low productivity because of sovereign risk, and how collateral differences across sectors may exacerbate the problem. I model sovereign borrowing with a two-sector economy: one sector with increasing returns to scale (IRS) and one sector with diminishing returns to scale (DRS). Countries with incomes below a threshold will only invest in the DRS sector, and countries with incomes above a threshold will invest mostly in the IRS sector. The results help explain the existence of a bimodal world income distribution.^ The third essay empirically tests the explanations for why capital has not flowed from the rich to the poor countries, with a focus on institutions and initial capital. I find that institutional variables are a very important factor, but in contrast to other studies, I show that institutions do not account for the Lucas Paradox. Evidence of increasing returns still exists, even when controlling for institutions and other variables. In addition, I find that the determinants of capital flows may depend on whether a country is rich or poor.^

Essays in Open Economy Macroeconomics

Research macroeconomists have witnessed remarkable methodological developments in mathematical, statistical, and computational tools during the last two decades. The three essays in this dissertation took advantage of these advances to analyze important macroeconomic issues. The first essay, “ Habit Formation, Adjustments Costs, and International Business Cycle Puzzles” analyzes the extent to which incorporating habit formation and adjustment costs in investment in a one-good two-country general equilibrium model would help overcome some of the international business cycle puzzles. Unlike standard results in the literature, the model generates persistent, cyclical adjustment paths in response to shocks. It also yields positive cross-country correlations in consumption, employment, investment, and output. Cross-country correlations in output are higher than the ones in consumption. This is qualitatively consistent with the stylized facts. These results are particularly striking given the predicted negative correlations in investment, employment, and output that are typically found in the literature. The second essay, “Comparison Utility, Endogenous Time Preference, and Economic Growth,” uses World War II as a natural experiment to analyze the degree to which a model where consumers' preferences exhibit comparison-based utility and endogenous discounting is able to improve upon existing models in mimicking the transitional dynamics of an economy after a shock that destroys part of its capital stock. The model outperforms existing ones in replicating the behavior of the saving rate (both on impact and along the transient paths) after this historical event. This result brings additional support to the endogenous rate of time preference being a crucial element in growth models. The last essay, “Monetary Policy under Fear of Floating: Modeling the Dominican Economy,” presents a small scale macroeconomic model for a country (Dominican Republic) characterized by a strong presence of fear of floating (reluctance to have a flexible exchange rate regime) in the conduct of monetary policy. The dynamic responses of this economy to external shocks that are of interest for monetary policy purposes are analyzed under two alternative interest rate policy rules: One being the standard Taylor rule and another that responds explicitly to deviations of the exchange rate with respect to its long-term trend.

Three Essays on Taxation, Growth and Consumption

The purpose of this dissertation is to examine three distributional issues in macroeconomics. First I explore the effects fiscal federalism on economic growth across regions in China. Using the comprehensive official data set of China for 31 regions from 1952 until 1999, I investigate a number of indicators used by the literature to measure federalism and find robust support for only one such measure: the ratio of local total revenue to local tax revenue. Using a difference-in-difference approach and exploiting the two-year gap in the implementation of a tax reform across different regions of China, I also identify a positive relationship between fiscal federalism and regional economic growth. The second paper hypothesizes that an inequitable distribution of income negatively affects the rule of law in resource-rich economies and provides robust evidence in support of this hypothesis. By investigating a data set that contains 193 countries and using econometric methodologies such as the fixed effects estimator and the generalized method of moments estimator, I find that resource-abundance improves the quality of institutions, as long as income and wealth disparity remains below a certain threshold. When inequality moves beyond this threshold, the positive effects of the resource-abundance level on institutions diminish quickly and turn negative eventually. This paper, thus, provides robust evidence about the endogeneity of institutions and the role income and wealth inequality plays in the determination of long-run growth rates. The third paper sets up a dynamic general equilibrium model with heterogeneous agents to investigate the causal channels which run from a concern for international status to long-run economic growth. The simulation results show that the initial distribution of income and wealth play an important role in whether agents gain or lose from globalization.

A conceptual ecological model to facilitate understanding the role of invasive species in large-scale ecosystem restoration

We developed a conceptual ecological model (CEM) for invasive species to help understand the role invasive exotics have in ecosystem ecology and their impacts on restoration activities. Our model, which can be applied to any invasive species, grew from the eco-regional conceptual models developed for Everglades restoration. These models identify ecological drivers, stressors, effects and attributes; we integrated the unique aspects of exotic species invasions and effects into this conceptual hierarchy. We used the model to help identify important aspects of invasion in the development of an invasive exotic plant ecological indicator, which is described a companion paper in this special issue journal. A key aspect of the CEM is that it is a general ecological model that can be tailored to specific cases and species, as the details of any invasion are unique to that invasive species. Our model encompasses the temporal and spatial changes that characterize invasion, identifying the general conditions that allow a species to become invasive in a de novo environment; it then enumerates the possible effects exotic species may have collectively and individually at varying scales and for different ecosystem properties, once a species becomes invasive. The model provides suites of characteristics and processes, as well as hypothesized causal relationships to consider when thinking about the effects or potential effects of an invasive exotic and how restoration efforts will affect these characteristics and processes. In order to illustrate how to use the model as a blueprint for applying a similar approach to other invasive species and ecosystems, we give two examples of using this conceptual model to evaluate the status of two south Florida invasive exotic plant species (melaleuca and Old World climbing fern) and consider potential impacts of these invasive species on restoration.

Essays on exchange rate economics

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. ^ Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. ^ Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. ^ Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption. ^

Three essays on labor liberalization and its effects on world economy

This dissertation consists of three theoretical essays on immigration, international trade and political economy. The first two essays analyze the political economy of immigration in developed countries. The third essay explores new ground on the effects of labor liberalization in developing countries. Trade economists have witnessed remarkable methodological developments in mathematical and game theoretical models during the last seventy years. This dissertation benefits from these advances to analyze economic issues related to immigration. The first essay applies a long run general equilibrium trade model similar to Krugman (1980), and blends it with the median voter ala-Mayer (1984) framework. The second essay uses a short run general equilibrium specific factor trade model similar to Jones (1975) and incorporates it with the median voter model similar to Benhabib (1997). The third essay employs a five stage game theoretical approach similar to Vogel (2007) and solves it by the method of backward induction. The first essay shows that labor liberalization is more likely to come about in societies that have more taste for varieties, and that workers and capital owners could share the same positive stance toward labor liberalization. In a dynamic model, it demonstrates that the median voter is willing to accept fewer immigrants in the first period in order to preserve her domestic political influence in the second period threatened by the naturalization of these immigrants. The second essay shows that the liberalization of labor depends on the host country's stock and distribution of capital, and the number of groups of skilled workers within each country. I demonstrate that the more types of goods both countries produce, the more liberal the host country is toward immigration. The third essay proposes a theory of free movement of goods and labor between two economies with imperfect labor contracts. The heart of my analysis lies in the determinants of talent development where individuals' decisions to emigrate are related to the fixed costs of emigration. Finally, free trade and labor affect income via an indirect effect on individuals' incentives to invest in the skill levels and a direct effect on the prices of goods.

Essays on Exchange Rate Economics

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption.

Numerical investigation on the heat transfer enhancement using micro/nano phase-change particulate flow

The introduction of phase change material fluid and nanofluid in micro-channel heat sink design can significantly increase the cooling capacity of the heat sink because of the unique features of these two kinds of fluids. To better assist the design of a high performance micro-channel heat sink using phase change fluid and nanofluid, the heat transfer enhancement mechanism behind the flow with such fluids must be completely understood. ^ A detailed parametric study is conducted to further investigate the heat transfer enhancement of the phase change material particle suspension flow, by using the two-phase non-thermal-equilibrium model developed by Hao and Tao (2004). The parametric study is conducted under normal conditions with Reynolds numbers of Re = 90–600 and phase change material particle concentrations of ϵp ≤ 0.25, as well as extreme conditions of very low Reynolds numbers (Re < 50) and high phase change material particle concentration (ϵp = 50%–70%) slurry flow. By using the two newly-defined parameters, named effectiveness factor ϵeff and performance index PI, respectively, it is found that there exists an optimal relation between the channel design parameters L and D, particle volume fraction ϵp, Reynolds number Re, and the wall heat flux qw. The influence of the particle volume fraction ϵp, particle size dp, and the particle viscosity μ p, to the phase change material suspension flow, are investigated and discussed. The model was validated by available experimental data. The conclusions will assist designers in making their decisions that relate to the design or selection of a micro-pump suitable for micro or mini scale heat transfer devices. ^ To understand the heat transfer enhancement mechanism of the nanofluid flow from the particle level, the lattice Boltzmann method is used because of its mesoscopic feature and its many numerical advantages. By using a two-component lattice Boltzmann model, the heat transfer enhancement of the nanofluid is analyzed, through incorporating the different forces acting on the nanoparticles to the two-component lattice Boltzmann model. It is found that the nanofluid has better heat transfer enhancement at low Reynolds numbers, and the Brownian motion effect of the nanoparticles will be weakened by the increase of flow speed. ^

Investigating the outcomes of two chronic disease self-management programs and understanding the correlates of completion for each program

Chronic disease affects 80% of adults over the age of 65 and is expected to increase in prevalence. To address the burden of chronic disease, self-management programs have been developed to increase self-efficacy and improve quality of life by reducing or halting disease symptoms. Two programs that have been developed to address chronic disease are the Chronic Disease Self-Management Program (CDSMP) and Tomando Control de su Salud (TCDS). CDSMP and TCDS both focus on improving participant self-efficacy, but use different curricula, as TCDS is culturally tailored for the Hispanic population. Few studies have evaluated the effectiveness of CDSMP and TCDS when translated to community settings. In addition, little is known about the correlation between demographic, baseline health status, and psychosocial factors and completion of either CDSMP or TCDS. This study used secondary data collected by agencies of the Healthy Aging Regional Collaborative from 10/01/2008–12/31/2010. The aims of this study were to examine six week differences in self-efficacy, time spent performing physical activity, and social/role activity limitations, and to identify correlates of program completion using baseline demographic and psychosocial factors. To examine if differences existed a general linear model was used. Additionally, logistic regression was used to examine correlates of program completion. Study findings show that all measures showed improvement at week six. For CDSMP, self-efficacy to manage disease (p = .001), self-efficacy to manage emotions (p = .026), social/role activities limitations (p = .001), and time spent walking (p = .008) were statistically significant. For TCDS, self-efficacy to manage disease (p = .006), social/role activities limitations (p = .001), and time spent walking (p = .016) and performing other aerobic activity (p = .005) were significant. For CDSMP, no correlates predicting program completion were found to be significant. For TCDS, participants who were male (OR=2.3, 95%CI: 1.15–4.66), from Broward County (OR=2.3, 95%CI: 1.27–4.25), or living alone (OR=2.0, 95%CI: 1.29-–3.08) were more likely to complete the program. CDSMP and TCDS, when implemented through a collaborative effort, can result in improvements for participants. Effective chronic disease management can improve health, quality of life, and reduce health care expenditures among older adults.

Online Education, Accrediting Standards, and Student Success: An Examination of the Relationship Between the Southern Association of Colleges and Schools Commission on Colleges Standards for Online Education and Student Success

Prior to 2000, there were less than 1.6 million students enrolled in at least one online course. By fall 2010, student enrollment in online distance education showed a phenomenal 283% increase to 6.1 million. Two years later, this number had grown to 7.1 million. In light of this significant growth and skepticism about quality, there have been calls for greater oversight of this format of educational delivery. Accrediting bodies tasked with this oversight have developed guidelines and standards for online education. There is a lack of empirical studies that examine the relationship between accrediting standards and student success. The purpose of this study was to examine the relationship between the presence of Southern Association of Colleges and Schools Commission on College (SACSCOC) standards for online education in online courses, (a) student support services and (b) curriculum and instruction, and student success. An original 24-item survey with an overall reliability coefficient of .94 was administered to students (N=464) at Florida International University, enrolled in 24 university-wide undergraduate online courses during fall 2014, who rated the presence of these standards in their online courses. The general linear model was utilized to analyze the data. The results of the study indicated that the two standards, student support services and curriculum and instruction were both significantly and positively correlated with student success but with small R2 and strengths of association less than .35 and .20 respectively. Mixed results were produced from Chi-square tests for differences in student success between higher and lower rated online courses when controlling for various covariates such as discipline, gender, race/ethnicity, GPA, age, and number of online courses previously taken. A multiple linear regression analysis revealed that the curriculum and instruction standard was the only variable that accounted for a significant amount of unique variance in student success. Another regression test revealed that no significant interaction effect exists between the two SACSCOC standards and GPA in predicting student success. The results of this study are useful for administrators, faculty, and researchers who are interested in accreditation standards for online education and how these standards relate to student success.