Instead of just focusing on the effect of exchange rate levels (undervalued or overvalued exchange rates) on trade, this paper provides an analysis of the effects of exchange rate volatility levels on international trade. Intuitively, an increase in exchange rate volatility leads to uncertainty for agents participating in international trade, and such uncertainty might have a negative impact on international trade flows and participation, thereby reducing the advantages of world-wide specialization. This is especially crucial for countries where exchange rate derivatives markets are not yet well developed and the costs of hedging exchange rate risk are very high. The model here considers optimal decisions about participation in international trade under uncertainty about the exchange rate. The main conclusion is that a high level of exchange rate volatility can deter entrepreneurs from becoming exporters, even though exporting can be highly profitable. For those already participating in international trade, it is opposite: they may, optimally, choose not to leave the market even though staying in this market is highly unprofitable in the short run.
Aus einem Symposium in Lund/Schweden im August 1996 ging der Sammelband hervor, der aus unterschiedlichen Blickwinkeln Perspektiven der sozio-ökonomischen Entwicklung und der regionalen Zusammenarbeit im südlichen Afrika nach dem Ende der Apartheid in Südafrika beleuchtet. (DÜI-Kör)
The “deliberative development” approach to policy reform has gained popularity in both academic and policy circles without a clear understanding of the requirements for its success. Based on a reading of the deliberative democracy literature, we detail those requirements, finding them to be quite restrictive. We then examine Bolivia’s 2000 National Dialogue, a national deliberation on development policy, and find—not surprisingly—that these requirements were generally missing. More importantly, we demonstrate that the lack of these requirements is not benign: the institutional characteristics of the Dialogue had direct effects, and the Dialogue continues to affect Bolivia’s politics in debatable ways. The late 1990s and early part of this decade witnessed what appeared to be a major change in the approach of international development institutions to policy reform. The most important evidence of this change was the Poverty Reduction Strategy Paper (PRSP) initiative of the World Bank and International Monetary Fund. This initiative, which arose in 1999 in the context of updating the Heavily Indebted Poor Countries’ (HIPC) Initiative, required countries to prepare a PRSP prior to receiving debt relief (see International Monetary Fund and International Development Association, 1999). Each country’s PRSP was to outline an overall strategy to reduce poverty, including structural reforms such as trade and privatization as well as specific anti-poverty programs. These PRSPs are now required to receive any World Bank or IMF concessional assistance. What made the PRSP initiative particularly innovative and noteworthy was that the Bank and Fund required that the strategy be developed in a “participatory” way. That is, the PRSP needed to be based on some sort of consultative process by which the government solicited input from various societal groups—including local nongovernmental organizations (NGOs), businesses, and unions—and then incorporated those preferences in the policy. This approach to government policymaking seemed to go directly against a line of academic work on economic reform that had been influential in these institutions for years (e.g. Sturzenneger and Tommasi, 1998), arguing that there was an inverse relationship between the success of economic reform and the amount of participation of society in making policies. Having criticized this old approach for years, most NGOs and developing country governments supported the new direction taken by the World Bank and IMF. In fact, few critics of the approach (e.g. Stewart and Wang, 2003) have critiqued the idea of participation, most instead focusing their critiques on the poor “extent” and “quality” of participation. In one of the benchmark articles supporting this “deliberative” approach to policy reform, Peter Evans (2004) notes that such an approach to policymaking is supported by work by the economists Amartya Sen (1999) and Dani Rodrik (2000), who argue that participation and public deliberation are means to better policies. Evans writes, “If it were possible to implant this sort of deliberative process in political units large enough to impact developmental trajectories—say, the provincial or municipal level—we would have something that could be called ‘deliberative development’” (2004: 37). Discussing examples from Porto Alegre, Brazil, and Kerala, India, Evans goes on to argue that this type of development is not only desirable, but attainable. Despite its increasing popularity in the academic and policy worlds, we still know little about what is needed for the deliberative development approach to be successful. While it may be true that political processes in Porto Alegre, Kerala, and elsewhere have exhibited deliberative aspects as well as positive development outcomes, the particular details of how the former relates to the latter remain murky. Are deliberative processes appropriate for all development decisions? Are there particular characteristics of the society that need to be present in order for deliberation to work well? Are there particular characteristics of the deliberative institutions that need to be present? Can there be any negative effects if deliberation is not done well? If the deliberative development approach is to be considered a viable and superior policymaking alternative, these questions must be answered.
Cameroon faces a challenging policy agenda over the next few years. The Government has been implementing its comprehensive poverty reduction strategy since April 2003. The Poverty Reduction Strategy Paper (PRSP) set an ambitious agenda for broad-based economic development with specific medium-term targets as well as detailed sector policies and programs for accelerating economic growth, strengthening the social sectors, and halving poverty over the following ten years. Despite a strong start, implementation of the PRSP slowed during the 2003-04 presidential election period, when fiscal discipline was relaxed and the restructuring of key public enterprises slowed. This faltering progress translated into much lower fiscal performance relative to program targets, higher government spending to prop up distressed key public enterprises, and the accumulation of domestic arrears. These developments led the International Monetary Fund (IMF) to declare Cameroon's Poverty Reduction and Growth Facility (PRGF) program off track in the third quarter of 2004, delaying attainment of the Heavily Indebted Poor Countries (HIPC) completion point by nearly two years. In the aftermath of the election, the Government developed an ambitious medium-term investment program intended to accelerate economic transformation and propel Cameroon into the group of fast-growing emerging countries. The Government is set to launch preparation of a new PRSP in early 2007. The new generation of the PRSP is expected to center on economic transformation and inclusive growth and to articulate a policy agenda that could pave the way for Cameroon to take off and get back on track to attain the Millennium Development Goals (MDGs) by 2015.
The Financial Sector Assessment Program (FSAP) team produced an Aide Memoire and the following three detailed reports that were reviewed by and delivered to the authorities: 1) technical notes; 2) assessment of compliance with standards and codes; and 3) detailed bank-by-bank stress tests. The Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) section of the report was based on the report of an International Monetary Fund (IMF) technical assistance mission undertaken in April 2004. Although Moldova is the poorest country in Europe, measured by per capita Gross Domestic Product (GDP), the country has achieved some success in building up the framework of a functioning market economy, especially in the banking sector. In addition to the underlying structural weaknesses, there are several potential macroeconomic problems that increase the vulnerability of the financial system. These include: a) the direct financing of the state budget by the central bank against the background of the weak fiscal and external situation; b) dependency on remittances; and c) dollarization, in combination with significant exchange rate volatility.