Economic Survey of Latin America and the Caribbean 2016: The 2030 Agenda for Sustainable Development and the challenges of financing for development

This, the sixty-eighth edition of the Economic Survey of Latin America and the Caribbean, which corresponds to the year 2016, consists of three parts. Part I outlines the region’s economic performance in 2015 and analyses trends in the first half of 2016, as well as the outlook for the rest of the year. It examines the external and internal factors influencing the region’s economic performance and highlights some of the macroeconomic policy challenges that have arisen in an external context of weak growth and high levels of uncertainty. Part II analyses the challenges that the countries of Latin America and the Caribbean face at the domestic and international levels in mobilizing financing for development. On the domestic front, slower growth and tighter fiscal restrictions pose significant challenges for the mobilization of resources. Externally, the classification of many of the region’s countries in the middle-income category limits their access to concessional external financing or international support. Part III of this publication may be accessed on the web page of the Economic Commission for Latin America and the Caribbean (www.eclac.org). It contains the notes relating to the economic performance of the countries of Latin America and the Caribbean in 2015 and the first half of 2016, together with their respective statistical annexes. The cut-off date for updating the statistical information in this publication was 30 June 2016.

Monopolistic insurance and competitive financial markets

This dissertation studies the interaction between insurance and financial markets. Individuals who differ only in risk can save through a competitive market. They also have access to insurance contracts offered by a monopolist firm. We show that an equilibrium exists in that economy. Fundamentally, we identify an externality imposed on the insurer's decision by the endogeneity of prices in the financial market.We argue that, because of such externality and in contrast to the pure contract theory case, equilibrium may exhibit pooling.

Essays on Monetary Policy in Small Open Economies

Thesis (Ph.D.)--University of Washington, 2016-06

Price discovery and volatility spillovers in index futures markets: Some evidence from Mexico

This paper investigates the hypotheses that the recently established Mexican stock index futures market effectively serves the price discovery function, and that the introduction of futures trading has provoked volatility in the underlying spot market. We test both hypotheses simultaneously with daily data from Mexico in the context of a modified EGARCH model that also incorporates possible cointegration between the futures and spot markets. The evidence supports both hypotheses, suggesting that the futures market in Mexico is a useful price discovery vehicle, although futures trading has also been a source of instability for the spot market. Several managerial implications are derived and discussed. (C) 2004 Elsevier B.V. All rights reserved.

Testing for market segmentation in the A and B share markets of China

Recent research has suggested that the A and B share markets of China may be informationally segmented. In this paper volatility patterns in the A and B share market are studied to establish whether volatility changes to the A and B share markets are synchronous. A consequence of new information, when investors act upon it is that volatility rises. This means that if the A and B markets are perfectly integrated volatility changes to each market would be expected to occur at the same time. However, if they are segmented there is no reason for volatility changes to occur on the same day. Using the iterative cumulative sum of squares across the different markets. Evidence is found of integration between the two A share markets but not between the A and B markets. © 2005 Taylor & Francis Group Ltd.

From national innovation systems to national innovation capacity:internationalisation and technology transfer perspectives

The last decade or so has witnessed the emergence of the national innovation system (NIS) phenomenon. Since then, many scholars have investigated NIS and its implementation in different countries. However, there are very few investigations into the relationship between the NIS of a country and its national innovation capacity. This paper aims to make a contribution in this area by examining the link that currently exists between these two topics. Whilst examining this relationship, we also explore internationalisation and technology transfer, being cognate areas that have been investigated during the same period. This follows our assertion that the link between NIS and national innovation capacity is the mechanism of internationalisation and technology transfer. The NIS approach was introduced in the late 1980s (see Freeman, 1987; Dosi et al., 1988) and further elaborated later (see Lundvall, 1992; Nelson, 1993; Edquist, 1997). In essence, a country?s NIS is a historically grown subsystem of the entire national economy consisting of organisations and institutions which play a major role in the innovative activity in the country. In the NIS approach, interactions within organisations as well as the interplay between organisations and institutions are of central importance. The NIS approach has been used to reveal the structure of the innovation processes and the main actors involved in them in industrialised and emerging countries. Although the national focus remains strong, it has been accompanied by studies seeking to analyse the notion of systems of innovation at an international level and at a sub-national scale (Archibugi et al., 1999). Dosi in the edition of Archibugi et al. (1999) argues that the general background of the discussion of national systems is the observation of non-random distributions across countries of: corporate capabilities; organisational forms; strategies; and ultimately revealed performances, in terms of production efficiency and inputs productivities, rates of innovation, rates of adoption/diffusion of innovation themselves, dynamics of market shares on the world markets, growth of income and employment. They also mention that there are several approaches to NIS. Nelson (1993) focuses upon the specificities of national institutions and policies supporting directly or indirectly innovation, diffusion and skills accumulation. Patel and Pavitt (1991) have stressed the links between the national patterns of technological accumulation and the competencies and innovative strategies of a few major national companies. Amable et al (1997) and Soskice (1993) and Zysman (1994) focus on the specifics of national institutions including, for example, the forms of organization, financial and labour markets, training institutions, forms of state intervention in the economy etc. However, the most common reference is by Lundvall (1992) who argues that the focus on the national level is associated with the fact that national economies vary according to their production system and their institutional framework and these differences are in turn strengthened by different historical experiences, language and culture. On the other hand, the national innovation capability consists of abilities to create and carry new technological possibilities through to economic practice. The term covers a wide range of activities from capability to invent to capability to innovate and to capability to improve existing technology beyond the original design parameters (Kim, 1997). The term innovation is often associated by many with technological change at international frontiers. However, technological capability is not the same as innovation capability. Technological capability refers to assimilation, use, adaptation, and change to existing technologies. It also enables the creation of new technologies and development of new products and processes in response to changing economic environments. It denotes operational command over knowledge (Kim, 1997). It is manifested not merely by the knowledge possessed, but, more important, by the uses to which that knowledge can be put and by the proficiency with which it is applied in the activities of investment and production and in the creation of new knowledge (Westphal et al., 1985). Therefore, the analytical framework that is used in this paper is based on the way a country derives from its NIS a national innovation capacity. There are two perspectives that are identified on this way. These are internationalisation and technology transfer. Even though NIS is not directly related to national innovation capacity, to achieve national innovation capacity from NIS, the country should have the ability for technology transfer. Technology transfer is a link between these two phenomena. On the other hand, internationalisation can be either the input or the output of the relationship between NIS and national innovation capability. If a company is investing in a country because of its national innovation capacity, this can be regarded as an input to the relationship between NIS and national innovation capacity. If this company is investigating the national innovation capacity of a country then, for its internationalisation, the national innovation capacity should be important, which in turn means this company is active in innovation and innovation is also an important success factor. The interrelationship between the investment of the company and the NIS of the country (assuming that the country is competent and competitive in technology transfer) will generate and improve that country?s national innovation capacity. This is the output of internationalisation from the relationship between NIS and national innovation capacity. When companies are evaluating whether to internationalise, they investigate certain factors in the countries in which they are considering to invest. The ability to transfer technology is dependent on ability to adopt a new technology and also on the learning derived from this technology. If countries wish to attract innovation related investment they need to show their ability to have a NIS and also the capability to transfer technology. Without the technology transfer capability, the NIS is not functioning. Therefore, companies that internationalise will investigate the factors common to NIS, technology transfer, and their business needs. Through this paper we will demonstrate this link though its mechanisms. Our research will be through extensive literature review and identifying relevant aspects of previous research carried out by the authors. It will investigate certain factors of different countries that are successful in attracting innovation related foreign direct investment. Through these, we will point out the factors that are important for the link and mechanisms of NIS and national innovation capability.

Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

By engaging in trade and foreign direct investment (FDI) with foreign partners, a country can access the R&D and related knowledge stocks of other countries (by accident or by design) and so benefit from those stocks of knowledge at a cost lower than that which would be incurred by developing the knowledge internally. This should lead to beneficial ‘spillover’ effects on the productivity of domestic firms. However, the literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the size of these effects varies depending on the technological and labour cost differentials between the UK and its trading partners. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored. We also find that absorptive capacity matters for spillovers from FDI, but not from trade. Overall, these findings suggest that the productivity effects of FDI are largely restricted to plants with high absorptive capacity, while the productivity effects of imports occur largely among higher-technology plants regardless of their absorptive capacity.

Openness and economic growth

The themes of this thesis are that international trade and foreign direct investment (FDI) are closely related and that they have varying impacts on economic growth in countries at different stages of development. The thesis consists of three empirical studies. The first one examines the causal relationship between FDI and trade in China. The empirical study is based on a panel of bilateral data for China and 19 home countries/regions over the period 1984-98. The specific feature of the study is that econometric techniques designed specially for panel data are applied to test for unit roots and causality. The results indicate a virtuous procedure of development for China. The growth of China’s imports causes growth in inward FDI from a home country/region, which in turn causes the growth of exports from China to the home country/region. The growth of exports causes the growth of imports. This virtuous procedure is the result of China’s policy of opening to the outside world. China has been encouraging export-oriented FDI and reducing trade barriers. Such policy instruments should be further encouraged in order to enhance economic growth. In the second study, an extended gravity model is constructed to identify the main causes of recent trade growth in OECD countries. The specific features include (a) the explicit introduction of R&D and FDI as two important explanatory variables into an augmented gravity equation; (b) the adoption of a panel data approach, and (c) the careful treatment of endogeneity. The main findings are that the levels and similarities of market size, domestic R&D stock and inward FDI stock are positively related to the volume of bilateral trade, while the geographical distance, exchange rate and relative factor endowments, has a negative impact. These findings lend support to new trade, FDI and economic growth theories. The third study evaluates the impact of openness on growth in different country groups. This research distinguishes itself from many existing studies in three aspects: first, both trade and FDI are included in the measurement of openness. Second, countries are divided' into three groups according to their development stages to compare the roles of FDI and trade in different groups. Third, the possible problems of endogeneity and multicollinearity of FDI and trade are carefully dealt with in a panel data setting. The main findings are that FDI and trade are both beneficial to a country's development. However, trade has positive effects on growth in all country groups but FDI has positive effects on growth only in the country groups which have had moderate development. The findings suggest FDI and trade may affect growth under different conditions.

Foreign direct investment and economic development:an interactive relationship

With the increasing importance of Foreign Direct Investment (FDI), there have been substantial studies on this issue, both empirically and theoretically. However, most existing studies focus on either the impacts of FDI presence or the determinants of FDI inflows, ignoring the fact that inward FDI and economic development may simultaneously affect each other. This thesis sets out to examine the interactive effects between FDI and economic development. The whole thesis is composed of five chapters. Chapter One is an overall introduction to the thesis. Chapter Two presents a theoretical study and chapter Two and Three provide two empirical studies. Chapter Five concludes. Chapter Two presents a theoretical two-sector model that features the importance of human capital in attracting foreign investment. This model theoretically explains why FDI is more likely to occur among countries that are similar in terms of human capital and technology. On the other hand, MNCs must train local employees to work with firm-specific technology and hence improve the technological skills of local workers. In Chapter Two, an empirical model is constructed to detect whether the productivities of foreign and local firms impact each other. The model is tested on China’s data at the industry level. The results indicate that productivity growth of local and foreign firms are jointly determined. Evidence also suggests that the extent to which spillovers occur varies with difference technology levels of local firms. Chapter Four investigates the relationship between FDI and economic grown based on a panel of data for 84 countries over the period 1970-1999. Both equations of FDI inflow and GDP growth are examined. The results indicate that FDI not only directly promotes economic growth by itself, but also indirectly does so via its interaction terms. There is a strong positive interaction effect of FDI with human capital and a strong negative interaction effect of FDI with technology gap on economic growth in developing countries.

Changing consumer markets and marketing in China

China's enormous population and rapidly increasing consumer spending are attractive to many multinational corporations (MNCs) to supply products to the Chinese markets. Yet MNCs continue to struggle to find ways to serve this diverse and culturally unique market. This article reviews and integrates existing knowledge on Chinese consumers' responses to marketing efforts, and specifies and empirically tests several propositions. Chinese consumers are found to have higher brand consciousness, brand loyalty, lower price sensitivity for visible goods, and to be less responsive to sales promotions compared to Western consumers. We also find indications that the influence of face considerations (i.e., prestige earned in a social network) cause Chinese consumers to have higher emphasis on prestige in their channel choices and advertisement evaluations than Western consumers. By outlining these implications, our study can help MNCs better understand how Chinese consumers behave and that understanding can help MNCs adapt their marketing efforts.

Public sector efficiency, foreign aid and small island development states

This paper examines the efficiency of public sector expenditures and foreign aid at achieving social sector outcomes in Small Island Developing States (SIDS). Efficiency is estimated using a Stochastic Production Function (SPF) approach and panel data since 1990. A second stage of the analysis examines the determinants of efficiency. Results indicate that the efficiency of aid and public sectors at improving life expectancy has deteriorated during the 1990s but efficiency at improving school enrolments has increased. Higher levels of governance are associated with higher efficiency. There is also evidence to suggest that efficiency is lower in SIDS, as well as in Sub-Saharan Africa.

Hungarian international development cooperation:context, stakeholders and performance

This paper explores the domestic and international context of Hungary's emerging international development policy. Specifically, it looks at three factors that may influence how this policy operates: membership in the European Union (EU) and potential ‘Europeanization’, Hungary's wider foreign policy strategy, and the influence of domestic stakeholders. In order to uncover how these factors affect the country's international development policy, semi-structured interviews were carried out with the main stakeholders. The main conclusions are: (1) While accession to the EU did play a crucial role in restarting Hungary's international development policy, the integration has had little effect since then; (2) international development policy seems to serve mainly Hungary's regional strategic foreign policy and economic interests, and not its global development goals; and (3) although all the domestic development stakeholders are rather weak, the Ministry of Foreign Affairs (MFA) still seems to play a dominating role. Convergence with European requirements and best practices is, therefore, clearly hindered by foreign policy interests and also by the weakness of non- governmental stakeholders.

Megtakarítások és külső finanszírozás az amerikai gazdaságban. A hitelpiaci válság háttere (1997-2007) (Savings and external financing in the American economy. The background to the credit-market crisis (1997–2007))

A tanulmány nem az aktuális hitelpiaci válság enyhítésének kérdésével foglalkozik, hanem az amerikai gazdaság elmúlt négy évtizedének általános és az utolsó tíz évének konkrét beruházási-megtakarítási és növekedési tendenciáit igyekszik feltárni. Azt vizsgálja, hogy milyen mélyebb, belföldi eredetű szerkezeti okai vannak a nemzetközivé dagadt jelzáloghitel-válságnak. A cikk a nyitott gazdaság külső finanszírozással összefüggő mérlegazonosságainak alapján arra a következtetésre jut, hogy az ingatlanpiaci visszaesés és a kibocsátás zsugorodása az Egyesült Államok gazdaságában már több mint másfél évtizede kialakult kedvezőtlen, de még tovább romló belföldi megtakarítási folyamatok következménye. A jelzálogpiac krízise és a lakásépítés drámai visszaesése a túlfogyasztásra és túlhitelezésre ösztönző pénzügyi környezet eredménye. A lakáspiaci és a hitelezési ciklusok pénzügyi innovációkkal történő megnyújtása inkább növelte, mint csökkentette a kibocsátásingadozás érzékenységét. A legfőbb hitelezők Kína, Japán, Németország inkább dolláralapú amerikai vállalati felvásárlásokkal ellensúlyozták a dollárgyengülésből elszenvedett veszteségeiket. 1997-2007 között az Amerikából külföldön befektetett dolláraktívák - javarészt a valuta leértékelődése nyomán - jelentős hozamemelkedést élveztek, és számottevően tompították a belföldön képződött jövedelmek csökkenését. A dollárleértékelődés az eszköz- (és nemcsak az áruexport) oldalon is előnyöket hozott számos nagyvállalatnak. / === / Rather than dealing with the immediate policy steps to dampen the crisis, this paper attempts to reveal the worsening savings/consumption pattern of the US economy over the last ten years. Based on the closed logic of open-economy GDP-accounting, it argues that the current crisis is deeply rooted in shrinking public and private savings trends discernible as early as 1997. The current mortgage-market crisis and deep fall in new residential housing are products of a distorted financial environment that encourages over-borrowing and over-consumption. Expansion of the credit cycle through successive financial innovations has increased, not decreased output volatility. But the main foreign lenders to the US—Japan, China and Germany—have managed to offset their losses on US securities by buying into US companies. Large US firms have also benefited from rapid dollar depreciation as USD-denominated yields on their foreign assets experienced strong run-ups. The weak dollar has also helped American firms with large assets on foreign markets. So there were strong benefits for the US, not just on the goods-export side, but on the asset side, an aspect rarely emphasized.

Hungarian International Development Cooperation: Context, Stakeholders and Performance

This paper explores the domestic and international context of Hungary's emerging international development policy. Specifically, it looks at three factors that may influence how this policy operates: membership in the European Union (EU) and potential ‘Europeanization’, Hungary's wider foreign policy strategy, and the influence of domestic stakeholders. In order to uncover how these factors affect the country's international development policy, semi-structured interviews were carried out with the main stakeholders. The main conclusions are: (1) While accession to the EU did play a crucial role in restarting Hungary's international development policy, the integration has had little effect since then; (2) international development policy seems to serve mainly Hungary's regional strategic foreign policy and economic interests, and not its global development goals; and (3) although all the domestic development stakeholders are rather weak, the Ministry of Foreign Affairs (MFA) still seems to play a dominating role. Convergence with European requirements and best practices is, therefore, clearly hindered by foreign policy interests and also by the weakness of non- governmental stakeholders.