Asset Price Instability and Policy Responses: The Legacy of Liberalisation

The debate about the dynamics and potential policy responses to asset inflation has intensified in recent years. Some analysts, notably Borio and Lowe, have called for 'subtle' changes to existing monetary targeting frameworks to try to deal with the problems of asset inflation and have attempted to developed indicators of financial vulnerability to aid this process. In contrast, this paper argues that the uncertainties involved in understanding financial market developments and their potential impact on the real economy are likely to remain too high to embolden policy makers. The political and institutional risks associated with policy errors are also significant. The fundamental premise that a liberalised financial system is based on 'efficient' market allocation cannot be overlooked. The corollary is that any serious attempt to stabilize financial market outcomes must involve at least a partial reversal of deregulation.

The knowledge gap: A perspective on trade, industry, technology and policy from pre-war Australian music technology manufacturing (1903-30)

Australia struggles to achieve economic competitiveness, prevent expansion of the trade deficit and develop value-added production despite applications of policy strategies from protectionism to trade liberalisation. This article argues that these problems were emerging at the turn of the century, and that an investigation of music technology manufacturing in the first two decades of this century reveals fundamental problems in the conduct of relevant policy analysis. Analysis has focused on the trade or technology gap which is only symptomatic of an underlying knowledge gap. The article calls for a knowledge policy approach which can allow protection without the negative effects of isolation from global markets and without having to resort to unworkable utopian free-trade dogma. A shift of focus from a 'goods traded' view to a knowledge transaction (or diffusion) perspective is advocated.

Returns to farm-level soil conservation on tropical steep slopes: The case of the Eritrean highlands

This study conducts an economic analysis of investment in simple soil conservation technologies in the highlands of Eritrea. The data used in the analysis were obtained from a farm survey and supplemented with data from secondary sources. Risk analysis techniques are used to take account of the uncertainties regarding the relationship between soil erosion and crop yield. The financial analysis reveals negative net present values (NPVs) and internal rates of return (IRRs) below 12 per cent for various slope categories. On the other hand, the economic analysis returns positive NPVs and IRRs of over 20 per cent. The results clearly indicate that in-vestment in soil conservation technology may not be a viable short-term proposition from the farmer's point of view and yet the net social benefits are positive. There is a strong case for government to provide incentives for soil conservation in view of the economic benefits.

Reducing the harms caused by cannabis use: the policy debate in Australia

The debate about cannabis policy in Australia has revolved around the harms that cannabis causes to users and the community, on the one hand, and the harms that are caused by the prohibition of its use, on the other. This paper assesses evidence on: (1) the harms caused to users and the community by cannabis use (derived from the international scientific literature) and (2) the harms that arise from prohibition (as reflected in Australian research). The most probable harms caused by cannabis use include: an increased risk of motor vehicle accidents; respiratory disease; dependence; adverse effects on adolescent development; and the exacerbation of psychosis. The harms of the current prohibition on cannabis use policy are less tangible but probably include: the creation of a large blackmarket; disrespect for a widely broken law; harms to the reputation of the unlucky few cannabis users who are caught and prosecuted; lack of access to cannabis for medical uses; and an inefficient use of law enforcement resources. Cannabis policy unavoidably involves trade offs between competing values that should be made by the political process. Australian cannabis policy has converged on a solution which continues to prohibit cannabis but reduces the severity of penalties for cannabis use by either removing criminal penalties or diverting first time cannabis offenders into treatment and education. (C) 2001 Elsevier Science Ireland Ltd. All rights reserved.

The secondary vascular system of Actinopterygii: interspecific variation in origins and investment

Vascular casts of 3 species of Chondrichthyes, 1 of Dipnoi, 1 of Chondrostei and 14 species of the Teleostei were examined by light and scanning electron microscopy in order to give a qualitative and quantitative analysis of interarterial anastomoses (iaas) that indicate the presence (or absence) of a secondary vascular system (SVS). Anastomoses were found to originate from a variety of different primary blood vessels, many of which have not been previously identified as giving rise to secondary vessels. Segmental arteries derived from the dorsal aorta and supplying body musculature were major sites of origin of the SVS, although there was considerable variation in where, in the hierarchy of arterial branching, the anastomoses occurred. The degree of investment in a SVS was species specific, with more active species having a higher degree of secondary vascularisation. This difference was quantified using an absolute count of iaas between Anguilla reinhardtii and Trachinotus baillonii. A range of general features of the SVS is also described. No evidence of iaas was found on the coeliac, mesenteric or renal circulation in any species. Evidence of iaas was lacking in the dipnoan and chondrichthyan species examined, suggesting that a SVS is restricted to Actinopterygii. The presence and distribution of a SVS does not appear to be exclusively linked to phylogenetic position, but rather to the physiological adaptation of the species.

STRUCTURAL INTERDEPENDENCE AMONG COLOMBIAN DEPARTMENTS

This paper analyzes structural interdependence among Colombian departments. The results show that Bogota has a large influence on the other regional economies through the power of its purchases. Additionally, a center-periphery pattern emerges in the spatial concentration of the effects of the hypothetical extraction of any territory. From a policy point of view, the main findings reaffirm the role played by Bogota in the recent polarization process observed in the regional economies in Colombia. Any policy action oriented to reduce these regional disparities should take into account that, given the structural interdependence among Colombian departments, the effects of new investment in the lagged regions would flow through Bogota and the major regional economies.

Heterogeneity, saving-investment dynamics and capital mobility in Latin America

The purpose of this paper is to analyze the dynamics of national saving-investment relationship in order to determine the degree of capital mobility in 12 Latin American countries. The analytically relevant correlation is the short-term one, defined as that between changes in saving and investment. Of special interest is the speed at which variables return to the long run equilibrium relationship, which is interpreted as being negatively related to the degree of capital mobility. The long run correlation, in turn, captures the coefficient implied by the solvency constraint. We find that heterogeneity and cross-section dependence completely change the estimation of the long run coefficient. Besides we obtain a more precise short run coefficient estimate compared to the existent estimates in the literature. There is evidence of an intermediate degree of capital mobility, and the coefficients are extremely stable over time.

Fiscal policy and reelection in Brazilian municipalities

This paper uses a new panel of more than 2,000 Brazilian municipalities over 13 years to analyze the influence of public expenditures on the probability of mayors` reelection. We examine Brazilian municipal elections from 1988 to 2000 using a logit fixed-effects model. The results suggest that mayors who spend more during their terms of office increase the probability of their own reelection or of a successor of the same political party. In particular, higher capital spending over the years preceding elections and current expenditures in election years are beneficial to Brazilian incumbent mayors.