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on Business, Economic and Financial History |
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Issue of 2007‒09‒24
25 papers chosen by |
| By: | Nicholas Vasilakos (Economics, Keele University); Gauthier Lanot (Keele University, Department of Economics); Tim Worrall (Economics, Keele University) |
| Abstract: | This paper reports on available bibliometric evidence on the performance of UK research in economics. It examines some standard and non-standard sources of bibliometric evidence and in particular evidence from the ISI and EconLit databases and the Repository of Papers in Economics (RePEc). It also reports on research capacity of UK economics and some non-bibliometric sources of evidence. |
| Keywords: | Research evaluation, bibliometrics. |
| JEL: | A10 I23 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:kee:kerpuk:2007/10&r=his |
| By: | Victoria N. Bateman |
| Abstract: | This paper attempts to establish the trend of market development in Europe in the centuries before the industrial revolution, by applying three different measures of market integration to a compilation of monthly and annual price data. In contrast to much of the existing work, which suggests that markets generally improved during this time, the findings propose that markets were as well integrated in the fifteenth century as in the late eighteenth century. In between these two times, markets are found to have suffered a severe contraction. These results provide a challenge to our current thoughts on economic growth. |
| Keywords: | Market Integration, Economic Growth, European Economic History, Price Data, Fixed Effects Panel Model |
| JEL: | F15 N13 O10 O52 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:350&r=his |
| By: | Paul Sharp (Department of Economics, University of Copenhagen); Jacob Weisdorf (Department of Economics, University of Copenhagen) |
| Abstract: | The Malthusian “preventive check” mechanism has been well documented for pre-industrial England through evidence for a negative correlation between the marriage rate and the price of wheat. Other literature, however, speculates that the correlation was in fact positive from the early nineteenth century. This paper uses the cointegrated VAR model and recursive estimation techniques to document the changing relationship between nuptiality and the price of wheat from 1541-1965. The relationship is indeed positive from the early nineteenth century to the First World War. A simple theoretical model shows that this result is not in fact inconsistent with a stylized Malthusian mechanism, and can be understood within the context of an increasing dominance of shocks to aggregate demand rather than to aggregate supply. |
| JEL: | J1 N3 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:0720&r=his |
| By: | Hugh Rockoff |
| Abstract: | During World War II Americans were called upon repeatedly to salvage raw materials for the war effort, often during brief, highly publicized "drives." Stories about the salvage drives are a staple in both popular and scholarly histories of the home front, and in film documentaries, because the drives appear to demonstrate the potential importance of non-economic motives such as patriotism and community spirit. Here I reexamine economic effects of five drives: aluminum, silk, cooking fat, and the two most important, iron and steel, and rubber. The drives, it turns out, had a more limited impact on the economy than might be imagined from some of the enthusiastic portrayals in the popular and historical literatures. At most, the drives increased scrap collections by relatively small margins above what would have been collected during a prosperous peacetime period. The impact of economic incentives on the supply of scrap materials, and the impact of the maneuvering of special interests for advantage, moreover, can be seen at every turn. If the drives were important it was through their impact on civilian morale. |
| JEL: | N42 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13418&r=his |
| By: | Leandro Prados de la Escosura |
| Abstract: | In Spain, inequality evolution fits a Kuznets curve. World wars increased inequality but had non-permanent effects. Progressive taxation had no impact until 1980. This picture is at odds with Atkinson, Piketty, Saez, and associates’ depiction of western countries. Stolper-Samuelson forces only partially explain inequality trends. A substantial fall in absolute poverty resulted from growth but also from inequality reduction in the Interwar and late 1950s. Rising inequality and extreme poverty were not at the roots of Spain’s Civil War. In the Golden Age, inequality contraction and absolute poverty eradication represent a major departure from Latin America’s performance while matches OECD’s. |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:cte:whrepe:wp07-13&r=his |
| By: | Norikazu TAKAMI (Graduate School of Economics, Osaka University) |
| Abstract: | In this paper I examine A. C. Pigou's views on the unemployment policies, based on the premise that, as he himself acknowledged, his theory of business fluctuations was one integral part of his whole thought about unemployment. In his Industrial Fluctuations (1927), Pigou gave the most extensive treatment to the monetary policy among the measures against business fluctuations. There he advocated more prompt and smooth action by the Bank of England in order to effectively stabilize the movement of general prices and the economy as a whole. In order for its action not to be affected by external monetary shocks, he suggested the withdrawal from the gold standard should the public opinion and international diplomatic relations allow it. Pigou, meanwhile, placed much less importance on wage adjustment as a palliative against business cycle. The recent studies direct attention to the fact that Pigou pointed out that after World War I money wages were made rigid by such factors as contemporary institutional changes in labor markets. This picture, however, lacks a more important element of his thought: the monetary cause due to the gold standard on the prewar parity. Putting his indirect remarks on this influence together, I argue that Pigou was well aware of the monetary situation and seemed to place greater importance on the monetary influence than the wage rigidity. |
| Keywords: | history of economic thought, Pigou, unemployment |
| JEL: | B13 B31 E24 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0733&r=his |
| By: | Marc Flandreau; Juan H. Flores |
| Abstract: | How does sovereign debt emerge and become sustainable? This paper provides a new answer to this unsolved puzzle. Focusing on the early 19th century, we argue that intermediaries’ market power served to overcome information asymmetries and sustained the development of sovereign debt. Relying on insights from corporate finance, we argue that capitalists turned to intermediaries’ reputations to guide their investment strategies. The outcome was a two-tier global bond market, which was sustained by hierarchical relations among intermediaries. This novel theoretical perspective is backed by new archival evidence and empirical data that have never been gathered so far. |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:cte:whrepe:wp07-12&r=his |
| By: | Ohlsson, Henry (Department of Economics) |
| Abstract: | This paper has two objectives. The first is to study the revenue from the gift, inheritance, and estate taxes in Sweden during more than a century. The second is to focus on a unique episode during the second half of the 1940s when gifts and gift tax revenue exploded. This episode has never before been discussed in the research literature. It gives an extremely clear illustration of behavioral response to taxes in general, and the impact of expectations of future tax increases in particular. It is also a very interesting episode in the economic history of Sweden. I have access to aggregate tax revenue data since 1884. Moreover, I have constructed a rich micro data set of all gifts reported during the period 1942–1949 in one county. A first main result is that gift tax revenue during the 1940s started to increase long before a new estate tax and increased wealth taxation were decided and implemented. The increase even began before the legislative process started. Second, both the number and the average values of gifts increased. Promissory notes were, in value, the most common way to give. Finally, gifts, inheritances, and estates were never important sources of tax revenue. Revenue as a share of GDP reached a peak already in the 1930s. The role of these taxes has instead primarily been equity and to provide integrity for other tax bases. |
| Keywords: | gift tax; inheritance tax; estate tax; tax avoidance; expectations |
| JEL: | D10 D31 H24 N33 N34 |
| Date: | 2007–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2007_023&r=his |
| By: | Roland G. Fryer, Jr; Steven D. Levitt |
| Abstract: | The Ku Klux Klan reached its heyday in the mid-1920s, claiming millions of members. In this paper, we analyze the 1920s Klan, those who joined it, and the social and political impact that it had. We utilize a wide range of newly discovered data sources including information from Klan membership roles, applications, robe-order forms, an internal audit of the Klan by Ernst and Ernst, and a census that the Klan conducted after an internal scandal. Combining these sources with data from the 1920 and 1930 U.S. Censuses, we find that individuals who joined the Klan were better educated and more likely to hold professional jobs than the typical American. Surprisingly, we find few tangible social or political impacts of the Klan. There is little evidence that the Klan had an effect on black or foreign born residential mobility, or on lynching patterns. Historians have argued that the Klan was successful in getting candidates they favored elected. Statistical analysis, however, suggests that any direct impact of the Klan was likely to be small. Furthermore, those who were elected had little discernible effect on legislation passed. Rather than a terrorist organization, the 1920s Klan is best described as a social organization built through a wildly successful pyramid scheme fueled by an army of highly-incentivized sales agents selling hatred, religious intolerance, and fraternity in a time and place where there was tremendous demand. |
| JEL: | J15 N32 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13417&r=his |
| By: | Ogilvie, S. |
| Abstract: | This paper examines recent attempts to rehabilitate pre-modern craft guilds as efficient economic institutions. Contrary to rehabilitation views, craft guilds adversely affected quality, skills, and innovation. Guild rent-seeking imposed deadweight losses on the economy and generated no demonstrable positive externalities. Industry flourished where guilds decayed. Despite impairing efficiency, guilds persisted because they redistributed resources to powerful groups. The ‘rehabilitation’ view of guilds, it concludes, is theoretically contradictory and empirically untenable. Key words: Institutions; guilds; rent-seeking; monopoly; craft; industry; quality; human capital; training; technology; innovation; economic history; methodology; local studies; case studies. |
| JEL: | N01 N43 O17 O43 P48 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0745&r=his |
| By: | Sabine Kurtenbach (GIGA Institute of Latin American Studies) |
| Abstract: | The termination of war is mostly seen as a basis not just for recovery but for a fundamental transformation or change in development paths towards peace, stability and development. The Central American peace processes of the last decades were one of the first laboratories for the liberal peace-building paradigm which assumes that the threefold transformation to peace, democracy and market economy is a self-strengthening process leading to sustainable development. Although none of the three countries slipped back into war, serious deficits remain. This paper introduces an analytical framework that aims at interrelating the threefold transformation with the impact generated by four processes. These include the repercussions generated by the international system on a country’s society, its historical, cultural and social foundations, the legacies of violence and the peacebuilding initiatives the country concerned has witnessed. The comparative analysis of changes in the public security sector, the political system, conflict resolution and the use of resources show why there is so much path dependency that can explain the deficits of transformation. |
| Keywords: | Peace-building, path-dependency, public security, political system, conflict resolution, resource use, Central America |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:gig:wpaper:59&r=his |
| By: | Paul Hallwood (University of Connecticut) |
| Abstract: | A model is developed explaining many common historical sequences: inter alia, the rise and fall of empires, expansion or contraction in the geographic size of nations, wars of secession, non-contested secessions, and growth of supra-national unions. The basic unit of analysis is a transaction in international (or national) law that verifies and legitimizes transformations from one organizational entity to another. Decision-makers for national, or super-national entities as well as those at sub-levels are assumed to be welfare maximizers under cost constraints. Potential secessionists face dispute costs, and decision-makers for the higher-level entity incur persuasion costs. Both costs may include military expenses. These transaction costs are shown to play a crucial role in determining the optimal number of independent countries in the world. |
| Keywords: | autonomous regions, causes of war, civil war, clash of civilizations, collapse of empire, economic union, empire, end of history, federalism, human rights, international borders, secession, self determination, theory of history, transaction costs, unitary state, war of secession. |
| JEL: | F5 K33 N40 P48 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2007-35&r=his |
| By: | Juan Carmona; James Simpson |
| Abstract: | The traditional view that sharecropping was a cause of low productivity in European agriculture prior to the Second World War has been challenged by economic historians, and today the contact is often considered as efficient at reducing the monitoring costs associated with labour and allocation of risk between landowners and farmers, especially when capital markets were weak for working capital. Yet if sharecropping was a relatively efficient contract, why was it not found more often? This paper looks at the vine, a crop that was widespread in Europe and that has been central to the current debates. It argues that while the literature has been right to emphasise the importance of the high monitoring costs, it has ignored the equally important costs associated with dividing the harvest. These were sufficiently large to make the contract unattractive, except in the few cases where the landowner was prepared to be actively involved in wine making and its sale, such as was found in Beaujolais or Tuscany. |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:cte:whrepe:wp07-11&r=his |
| By: | Anderson, Kym; Lloyd, Peter J; Maclaren, Donald |
| Abstract: | Australia’s lacklustre economic growth performance in the first four decades following World War II was in part due to an anti-trade, anti-primary sector bias in government assistance policies. This paper provides new annual estimates of the extent of those biases since 1946 and their gradual phase-out during the past two decades. In doing so it reveals that the timing of the sectoral assistance cuts was such as sometimes to improve but sometimes to worsen the distortions to incentives faced by farmers. Also, the changes increased the variation of assistance rates within agriculture during the 1950s and 1960s, reducing the welfare contribution of those programs in that period. While the assistance pattern within agriculture appears not to have been strongly biased against exporters, its reform has coincided with a substantial increase in export orientation of many farm industries. The overall pattern for Australia is contrasted with that revealed by comparable new estimates for other high-income countries. |
| Keywords: | agricultural assistance; Distorted incentives; manufacturing protection; trade policy reform |
| JEL: | F13 F14 Q17 Q18 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6436&r=his |
| By: | Cukierman, Alex |
| Abstract: | This is an extensive survey of worldwide developments in the area of monetary policymaking institutions during the second half of the twentieth century and beyond. In addition the last section discusses current open issues and future challenges. Section 2 reviews the changes that have occurred in the area of central bank independence (CBI) during the last twenty years, discusses reasons for those developments and provides an overview of accumulated empirical evidence on the relation between CBI and the performance of the economy. Section 3 discusses lessons from stabilization of inflation, reviews the evidence and implications of asymmetric central bank objectives and considers the issue of CBI within the broader context of choosing a nominal anchor. Section 4 reviews the impact of effective conservativeness (or independence) on economic performance in the presence of labour unions. A main insight is that, in the presence of large wage setters, CBI affects real variables like the rate of unemployment implying that conservativeness affects economic performance even in the long run. Section 5 considers future challenges facing modern central banks. The discussion presumes that CBI and price stability are here to stay and focuses on issues relating to the conduct of monetary policy by independent central banks in an era of price stability. The section discusses the risks associated with flexible inflation targeting, issues of accountability and transparency and the impact of central bank capital and finances on its independence. |
| Keywords: | central bank independence; economic performance; monetary institutions and future challenges; nominal anchors |
| JEL: | E31 E50 E52 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6441&r=his |
| By: | Paul Sharp (Department of Economics, University of Copenhagen); Jacob Weisdorf (Department of Economics, University of Copenhagen) |
| Abstract: | It has become popular to argue (e.g. Clark 2007) that all societies were Malthusian until about 1800. At the same time, the phenomenon of surplus labour is well-documented for historical (as well as modern) pre-industrial societies. This study discusses the paradox of surplus labour in a Malthusian economy. Inspired by the work of Boserup (1965) and others, and in contrast to the Lewis (1954) approach, we suggest that the phenomenon of surplus labour is best understood through an acceptance of the importance of seasonality in agriculture. Boserup observed that the harvest season was invariably associated with labour shortages (the high-season bottleneck on production), although there might be labour surplus during the low season. We introduce the concept of seasonality into a stylized Malthusian model, and endogenize the extent of agricultural labour input, which is then used to calculate labour surplus and the rate of labour productivity. We observe the effects of season-specific technological progress, and find that technological progress in the low-season increases labour surplus and labour productivity whilst, perhaps surprisingly, technological progress in the high-season, by relaxing the high-season bottleneck, leads to work intensification and a drop in labour surplus and labour productivity. |
| Keywords: | Boserup; labour productivity; labour surplus; land productivity; Malthus; seasonality |
| JEL: | J22 N13 O10 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:0719&r=his |
| By: | Fabio Sánchez Torres; Antonella Fazio Vargas; María del Pilar López Uribe |
| Abstract: | Este estudio desarrolla la relación entre la expansión de la oferta de tierras y el desarrollo exportador a finales del siglo XIX e intenta explicar la lánguida inserción de la economía colombiana a la economía mundial durante la ola de globalización que se inició a mediados del siglo XIX. Con base en la información sobre producción de cultivos exportables a nivel municipal de 1892, adjudicación de baldíos y conflictos de tierra durante el siglo XIX se encuentra que el mayor obstáculo que enfrentó el desarrollo exportador fue la debilidad de los derechos de propiedad de los colonos en las tierras de frontera, resultante del riesgo de expropiación o usurpación por parte de terratenientes locales. A partir de los resultados cuantitativos se calcula que en ausencia de conflicto de tierras la probabilidad de que un municipio hubiese tenido producción de productos exportables habría sido 50% más alta mientras la producción de productos exportables habría sido por lo menos el doble de la observada. Para corregir por la posible endogeneidad entre el desarrollo exportador local (municipal) y los conflictos de tierra locales se utiliza como instrumento de estos últimos la cercanía geográfica a la presencia de instituciones coloniales (Encomienda en 1560 y Esclavitud –poblaciones con más de 20 esclavos en 1800). |
| Date: | 2007–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:004015&r=his |
| By: | Marcelo de Paiva Abreu (Department of Economics, PUC-Rio); João Manoel Pinho de Mello (Department of Economics, PUC-Rio); Anônio de A. Sodré (Department of Economics, PUC-Rio) |
| Abstract: | We document a novel type of international financial contagion whose driving force is shared financial intermediation. In the London peripheral sovereign debt market during pre-1914 period financial intermediation played a major informational role to investors, most likely because of the absence of international monitoring agencies and the substantial agency costs. Using two events of financial distress – the Brazilian Funding Loan of 1898 and the Greek Funding Loan of 1893 – as quasi-natural experiments, we document that, following the crises, the bond prices of countries with no meaningful economic links to the distressed countries, but shared the same financial intermediary, suffered a reduction relative to the rest of the market. This result is true for the mean, median and the whole distribution of bond prices, and robust to an extensive sensitivity analysis. We interpret this as evidence that the identity of the financial intermediary was informative, i.e, investors extracted information about the soundness of a debtor based on the performance of her financial intermediary. This spillover, informational in essence, arises as the flip-side of the relational lending coin: contagion arises for the same reason why relational finance (in this case, underwriting) helps alleviate informational and incentive problems, |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:rio:texdis:552&r=his |
| By: | Eric Penot (INNOVATION - Changement technique, apprentissage et coordination dans l'agriculture et l'agroalimentaire - [CIRAD : UMR85]) |
| Abstract: | The aim of this chapter is to describe changes in the Indonesian jungle rubber system from the angle of the production of innovation by farmers themselves (indigenous knowledge) and the process of integration of external technical innovations in an overall process of creation of innovation. In other words, the integration of indigenous knowledge at different stages of history with rubber has enabled, and continues to enable farmers to rely on the sustainable cropping and farming systems represented by agroforestry systems. |
| Keywords: | shifting agriculture ; complex agroforestry systems ; jungle rubber ; rubber ; adoption of innovations |
| Date: | 2007–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:hal-00173302_v1&r=his |
| By: | Fernando A. Veloso; André Villela; Fabio Giambiagi |
| Abstract: | The goal of this paper is to quantify, using a growth regression methodology with panel data, the importance of possible determinants of the Brazilian economic "miracle" of 1968-1973. In particular, we verify to what extent the "miracle" was due to the favourable external environment, to the economic policy variables in the period 1968-1973 and to the institutional reforms of the 1964-1966 Paeg economic program. The results show that both the external environment and the economic policy variables explain a relatively small fraction of the growth acceleration between 1962-1967 and 1968-1973. This is due to the fact that the growth model estimated using a six-year panel overestimates considerably the Brazilian economic growth in the period that preceded the "miracle" and underestimates the growth rate for the "miracle" period. The results show, however, that the model estimated using a tenyear panel predicts a growth rate for Brazil during the period 1964-1973 that is very close to the one observed during this period. Taken together, our results indicate that the growth acceleration episode associated with the "miracle" was due to a large extent to the delayed effect of the reforms associated with the Paeg. |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:1273&r=his |
| By: | Korhonen , Iikka (BOFIT) |
| Abstract: | Straightforward exchange rate arrangements known as currency boards have gained popularity during the past dec-ade. Among transition economies, Estonia first introduced a currency board in 1992, followed by Lithuania in 1994 and Bulgaria in 1997. Currency boards have been useful in achieving macroeconomic stabilization, and they may have helped the Baltics become the first countries of the former Soviet Union (FSU) to achieve economic growth after the slump in production of the early 1990s. Moreover, Baltic inflation performance has been substantially better than in other FSU countries. Both in Estonia and Lithuania, the present exchange rate system has been ac-companied by strong real appreciation of the currency. Both in Estonia and Lithuania the present exchange rate system has been accompanied by strong real appreciation of the currency, although it is widely accepted that the currencies were very much undervalued at the beginning of their pegs. However, if rapid real appreciation is ac-companied with increases in the labor productivity, the present pegs can be maintained. Banking crises in Estonia and Lithuania have not been particularly severe, so apparently rigid currency pegs have not been accompanied by excessive financial sector instability. The tight fiscal policies pursued in both countries, especially Estonia, have been instrumental to the success of these currency board arrangements. |
| Keywords: | exchange rate; currency board; Baltic countries |
| JEL: | E50 E60 P20 |
| Date: | 2007–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:1999_006&r=his |
| By: | Joshua D. Angrist; Stacey H. Chen |
| Abstract: | This paper uses the 2000 Census 1-in-6 sample to look at the long-term impact of Vietnam-era military service. Instrumental Variables estimates using draft-lottery instruments show post-service earnings losses close to zero in 2000, in contrast with earlier results showing substantial earnings losses for white veterans in the 1970s and 1980s. The estimates also point to a marked increase in schooling that appears to be attributable to the Vietnam-era GI Bill. The net wage effects observed in the 2000 data can be explained by a flattening of the experience profile in middle age and a modest return to the increased schooling generated by the GI Bill. Evidence on disability effects is mixed but seems inconsistent with a long-term effect of Vietnam-era military service on health. |
| JEL: | I18 I22 J24 J31 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13411&r=his |
| By: | Ufuk Tutan (Department of Economics, Izmir University of Economics); Al Campbell (Department of Economics, University of Utah) |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:izm:wpaper:0501&r=his |
| By: | Rafael Santos |
| Abstract: | In Bogotá the 1991 reforms obstructed a market for votes. Clientelism lost its effectiveness; citizens developed a vote of opinion and the city showed an outstanding performance in the provision of public goods and social services. This story is illustrated with a novel panel data at the neighborhood voting precinct level from 1988 to 2003. An interesting episode exposes the changing class preferentes of Bogotá citizens for each of its mayors. However, the main result is the structural break caused by the reforms. Prior to 1991, the areas with the most exposure to clientelism generated a greater percentage of votes for traditional parties and obtained a greater coverage of social services; since 1991, both relationships are no longer true. A political machine collapses. |
| Date: | 2007–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:004011&r=his |
| By: | Singh, Rupinder (BOFIT); Laurila , Juhani (BOFIT) |
| Abstract: | The macro economic stabilisation in Azerbaijan has been successful. Following cessation of conflict with Armenia, and decline of GDP by 60 per cent from 1990 to 1995, the government in effect implemented a big-bang reform process in 1995. The inflation rate has now declined to the lowest rate of any transition country and important reforms in the monetary-fiscal mix have been undertaken. The second plank of first generation reforms, liberalisation, has also been successfully implemented with liberalisation of prices, the trade and foreign exchange regimes and virtual completion of small-scale privatisation, although the onset of the Russian crisis in 1998 has impacted negatively both internal and external balances. The paper presents the current economic picture for Azerbaijan and then assesses economic policy issues facing the country. Azerbaijan is well endowed with natural resources, particularly oil but also gas. The second part of the paper considers the question by focussing on policy issues related to the potential flow of oil-based monies into Azerbaijan. The possibility of the “Dutch Disease” syndrome impacting Azerbaijan through a rising real exchange rate on the non-oil sector is not considered to be a problem at present but is expected to become a policy concern in the medium- to long term. Structural reforms in public finance to deal with expected surpluses are lagging and are necessary in the next phase of the transition of Azerbaijan. Moreover, significant reforms are required in banking – privatisation, improvement in regulation and supervision and in the implementation of supporting legal rights, given the current lack of financial intermediation. |
| Keywords: | Azerbaijan; economic development; oil; Dutch Disease; transition economies |
| JEL: | E60 P20 P30 |
| Date: | 2007–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:1999_005&r=his |