New Economics Papers
on Business, Economic and Financial History
Issue of 2010‒05‒02
twenty-two papers chosen by

  1. A Concise History of Exchange Rate Regimes in Latin America By Roberto Frankel; Martín Rapetti
  2. The origins of the Bilbao Stock Exchange, 1891-1936 By Stefan Houpt; Juan Carlos Rojo Cagigal
  3. Processes of Migration in Latin America and the Caribbean (1950-2008) By Jorge Durand
  4. Evolving Phillips trade-off By Luca Benati
  5. Colonial Institutions, Slavery, Inequality, and Development: Evidence from São Paulo, Brazil By Summerhill, William
  6. The Cliometrics of International Migration: A Survey By Hatton, Timothy J.
  7. Mean Reversion in International Stock Markets: An Empirical Analysis of the 20th Century By Laura Spierdijk; Jacob Bikker; Pieter van den Hoek
  8. Reading the Recent Monetary History of the U.S., 1959-2007 By Jesús Fernández-Villaverde; Pablo Guerrón-Quintana; Juan F. Rubio-Ramírez
  9. The Neolithic Revolution from a Price-Theoretic Perspective By Ricardo Andrés Guzmán; Jacob Weisdorf
  10. Comparing Productivity in the Netherlands, France, UK and US, ca. 1910:A new PPP benchmark and its implications for changing economic leadership By Woltjer, P.; Smits, Jan-Pieter; Frankema, Ewout
  11. The Global Crisis: Why Regulators Resist Reforms By Leo F. Goodstadt
  13. The Global Crisis: Why Laisser-faire Hong Kong Prefers Regulation By Leo F. Goodstadt
  15. Modeling Disaster: The Failure of Management of the New England Groundfish Industry By James M. Acheson; Roy Gardner
  16. The Evolution of Kаzakhstan's Position on Relations with Russia in 1991-2010 By Vinokurov, Evgeny
  17. The Global Crisis: Fatal Decisions - Four Case Studies in Financial Regulation By Leo F. Goodstadt
  19. Problems and Prospects of Islamic Banking: a case Study of Takaful By Ahmad, Mohd Izhar; Masood, Tariq; Khan, Mohd Saeed
  20. Specific Accounting Records for General Insurance in Conditions of the Harmonizing Romanian Legislation with International Accounting and Financial Reporting By Dobrin, Marinica
  21. Global Financial crisis and Islamic finance By Alasrag, Hussien
  22. Fragments on the black swan: money, credit and finance in The Arcades Project of Walter Benjamin By Estrada, Fernando

  1. By: Roberto Frankel; Martín Rapetti
    Abstract: This paper analyzes the experience of the major Latin American countries including Argentina, Brazil, Mexico, Colombia, Chile, Peru and others in the post-World-War period, up to the crisis caused by the collapse of the U.S. housing bubble. The authors provide a detailed historical analysis that takes into account the most important economic events that helped determine exchange rate policy, and evaluates the strengths and weaknesses of the various exchange rate regimes, and their impact on outcomes including economic growth and inflation.
    Keywords: capital controls, capital flows
    JEL: O5 O55 F F3 F31 F33
    Date: 2010–04
  2. By: Stefan Houpt; Juan Carlos Rojo Cagigal
    Abstract: This paper presents first results of our more recent research on the Bilbao stock exchange from its foundation in 1890 up to the Spanish civil war. We examine the stock market’s origins and follow its evolution over the first half century of existence. To this end we introduce some of the stock exchange indexes we have calculated for Bilbao and put them into comparative perspective with the existing series on general economic and industrial activity and the indexes for other Spanish exchanges for the period considered. Finally, we contrast the degree of market integration associated to the existing Spanish exchange indexes. We find strong support for considering the Bilbao Stock Exchange index an industrial index and little evidence of capital market integration between the principal Spanish exchanges before the 1920s.
    Keywords: Bilbao, Stock exchange, Origins, Integration, Capital markets, Spain
    JEL: N23 N24 E44 F36
    Date: 2010–04
  3. By: Jorge Durand (University of Guadalajara and Centro de Investigación y Docencia Económica (CIDE))
    Abstract: The main characteristic of the Latin American migration on the 20th century was the change of flow. Until the 1950s, Latin America received migrants from Europe and the Middle East. As a result of economic change, political instability, and economic crisis, Latin America started exporting migrant workers. Now, Latin American migrants mainly go to the U.S., and in less extend to Europe (i.e. Spain, Italy, and Portugal), and in some cases to Japan as it is the case of Peru and Brazil. Several migrant patterns follow this process, which is characteristic to the massive emigration at the dawn of the 21st century.
    Keywords: Latin America, immigration, emigration, United States, Europe
    JEL: O1 O15 Z1 F22
    Date: 2009–07
  4. By: Luca Benati (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: We characterise the evolution of the U.S. unemployment-inflation trade-off since the late XIX century era via a Bayesian time-varying parameters structural VAR. The Great Inflation episode appears as historically unique along several dimensions. In particular, the shape of the ‘Phillips loop’–which is defined in terms of the impulse-response functions of inflation and unemployment’s deviations from equilibrium–was, during those years, clearly out of line with respect to the rest of the sample period for all structural innovations except money demand shocks. During the Great Depression, on the other hand, the Phillips trade-off did not exhibit any peculiar qualitative feature, so that, when seen through these lenses, the 1930s only stand out because of the sheer size of the macroeconomic fluctuation. The historical evolution of the Phillips trade-off exhibits virtually no connection with the evolution of the extent of trade openness of the U.S. economy. Although, by itself, this does not rule out a possible impact of globalisation on the slope of the trade-off in recent years, it clearly suggests that, historically, the evolution of the trade-off has been dominated by factors other than trade openness. JEL Classification:
    Keywords: Phillips trade-off, Lucas critique, Bayesian VARs, time-varying parameters, stochastic volatility, identified VARs, Great Inflation, Great Depression, globalisation.
    Date: 2010–04
  5. By: Summerhill, William
    Abstract: Brazil is frequently portrayed as exhibiting persistent and structural economic inequality that is rooted in the early colonial experience, and is believed to undermine development in the long run. I construct original measures of agricultural inequality for 1905 in what is today Brazil’s largest state, using farm-level micro data for some 50,000 farms. Using these measures of inequality, along with contemporary covariates and other historical variables I assess the impact of colonial institutions, slavery, farm inequality, and political inequality on long-term development in São Paulo. The principal findings are: (1) a potentially coercive colonial institution, the aldeamento, is positively correlated with income per capita at the end of the twentieth century; (2) measures of the intensity of slavery have little if any independent impact on income in 2000; (3) farm inequality was not persistent in São Paulo at the county level over the twentieth century; (4) in both OLS and IV estimates, no negative effect can be found for 1905 inequality on long-term development; (5) political inequality in the early twentieth century, measured by the extent of the franchise, is unrelated to contemporary farm inequality, and also unrelated to long-term economic growth; and (6) the provision of local public goods in the early twentieth century, measured by local public education outlays, has a positive impact on long-term development, but was not related to contemporary economic or political inequality. Overall, neither the intensity of slavery nor the pattern of inequality had any discernable negative economic impact in the long run.
    Keywords: Inequality; economic development; wealth; agriculture; regional analysis; growth; slavery; underdevelopment; municipalities; Latin America; public finance
    JEL: O1 N9 O13
    Date: 2010–04–14
  6. By: Hatton, Timothy J. (Australian National University)
    Abstract: This is a survey of some of the key studies in the literature on international migration in history that may be described as cliometric. This literature uses the concepts and approaches of applied economics to investigate a range of historical issues and there are strong parallels with the questions that have been addressed in the literature on contemporary migrations. Here I focus on the period 1850 to 1940 and chiefly on migration from Europe to the New World. The survey is organised around six themes that include: the forces driving migration, over time and across space; the assimilation of migrants and their effects on wages and income distribution in source and destination countries; and the evolution of immigration policy. While this literature has drawn heavily on the tool kit of applied economists it also provides a wider perspective on many of the issues that concern migration today.
    Keywords: international migration, economic history
    JEL: F22 N30 J61
    Date: 2010–04
  7. By: Laura Spierdijk; Jacob Bikker; Pieter van den Hoek
    Abstract: This paper analyzes mean reversion in international stock markets during the period 1900-2008, using annual data. Our panel of stock indexes in seventeen developed countries, covering a time span of more than a century, allows us to analyze in detail the dynamics of the mean-reversion process. In the period 1900-2008 it takes stock prices about 13.8 years, on average, to absorb half of a shock. However, using a rolling-window approach we establish large fluctuations in the speed of mean reversion over time. The highest mean reversion speed is found for the period including the Great Depression and the start of World War II. Furthermore, the early years of the Cold War and the period covering the Oil Crisis of 1973, the Energy Crisis of 1979 and Black Monday in 1987 are also characterized by relatively fast mean reversion. Overall, we document half-lives ranging from a minimum of 2.1 years to a maximum of 23.8 years. In a substantial number of time periods no significant mean reversion is found at all, which underlines the fact that the choice of data sample contributes substantially to the evidence in favour of mean reversion. Our results suggest that the speed at which stocks revert to their fundamental value is higher in periods of high economic uncertainty, caused by major economic and political events.
    Keywords: mean reversion; market efficiency
    JEL: C23 G14 G15
    Date: 2010–04
  8. By: Jesús Fernández-Villaverde (Department of Economics, University of Pennsylvania); Pablo Guerrón-Quintana (Federal Reserve Bank of Philadelphia); Juan F. Rubio-Ramírez (Department of Economics, Duke University)
    Abstract: In this paper we report the results of the estimation of a rich dynamic stochastic general equilibrium (DSGE) model of the U.S. economy with both stochastic volatility and parameter drifting in the Taylor rule. We use the results of this estimation to examine the recent monetary history of the U.S. and to interpret, through this lens, the sources of the rise and fall of the great American inflation from the late 1960s to the early 1980s and of the great moderation of business cycle fluctuations between 1984 and 2007. Our main findings are that while there is strong evidence of changes in monetary policy during Volcker’s tenure at the Fed, those changes contributed little to the great moderation. Instead, changes in the volatility of structural shocks account for most of it. Also, while we find that monetary policy was different under Volcker, we do not find much evidence of a big difference in monetary policy among Burns, Miller, and Greenspan. The difference in aggregate outcomes across these periods is attributed to the time- varying volatility of shocks. The history for inflation is more nuanced, as a more vigorous stand against it would have reduced inflation in the 1970s, but not completely eliminated it. In addition, we find that volatile shocks (especially those related to aggregate demand) were important contributors to the great American inflation.
    Keywords: DSGE models, Stochastic volatility, Parameter drifting, Bayesian methods.
    JEL: E10 E30 C11
    Date: 2010–04–15
  9. By: Ricardo Andrés Guzmán (Universidad del Desarrollo, Chile); Jacob Weisdorf (Department of Economics, University of Copenhagen)
    Abstract: The adoption of agriculture during the Neolithic period triggered the first demographic explosion in history. When fertility returned to its original level, agriculturalists were more numerous, more poorly nourished, and worked longer hours than their hunter-gatherer ancestors. We develop a dynamic price-theoretic model that rationalizes these events. In the short run, people are lured into agriculture by the increased labor productivity of both adults and children. In the long run, the growth in population overrides the productivity gains, and the later generations of agriculturalists end up being worse off than the hunter-gatherers. Counter-intuitively, the increase in the labor productivity of children causes the long-run reduction in welfare. In the long run, the increase in adult labor productivity only contributes to population growth.
    Keywords: Neolithic Revolution; hunter-gatherers; child labor; Thomas Malthus
    Date: 2010–04
  10. By: Woltjer, P.; Smits, Jan-Pieter; Frankema, Ewout (Groningen University)
    Abstract: This paper presents a new benchmark of fisher weighted sector PPPs for agriculture, mining and five manufacturing branches in the US, UK, France and the Netherlands around 1910. The PPPs are constructed according to an industry-of-origin approach in order to assess comparative levels of labour productivity at a sector level. The estimates are subsequently used to build up a comparison of total labour productivity and GDP per capita. Our main findings are that the relative levels of labour productivity and per capita GDP in the Western European countries have been overestimated in the literature so far. A backward projection of our productivity estimates into the nineteenth century sheds new light on the timing of the take-over in productivity and income leadership between the Netherlands, UK and US. The US-UK take-over occurred between 1879 and 1899 in terms of GDP per capita, but we show that in terms of aggregate labour productivity the US was already world leader around 1850. The Dutch economy seems to have lost its economic leadership earlier than hitherto has been assumed.
    Date: 2010
  11. By: Leo F. Goodstadt (Hong Kong Institute for Monetary Research, Trinity College, University of Dublin, The University of Hong Kong)
    Abstract: An Anglo-American regulatory ¡¥culture¡¦ became associated with 30 years of worldwide economic reforms, global growth and monetary stability. American and British officials identified major sources of instability in their own financial markets before 2007 but remained non-interventionist, invoking the concepts of virtuous markets and moral hazard. They also ignored the policy defects revealed by past crises. Despite record banking losses and fiscal imbalances during the global crisis, their current resistance to regulatory reforms is supported by a powerful political and business consensus.
    Keywords: Non-Interventionism, Basel, Virtuous Markets, Moral Hazard, Regulatory Culture
    Date: 2009–11
  12. By: Thomas Hazlett (School of Law, George Mason University); David Porter (Economic Science Institute, CHapman University); Vernon L. Smith (Economic Science Institute, Chapman University)
    Abstract: In the Federal Communications Commission, Ronald Coase exposed deep foundations via normative argument buttressed by astute historical observation. The government controlled scarce frequencies, issuing sharply limited use rights. Spillovers were said to be otherwise endemic. Coase saw that Government limited conflicts by restricting uses; property owners perform an analogous function via the “price system.” The government solution was inefficient unless the net benefits of the alternative property regime were lower. Coase augured that the price system would outperform. His spectrum auction proposal was mocked by communications policy experts, opposed by industry interests, and ridiculed by policy makers. Hence, it took until July 25, 1994 for FCC license sales to commence. Today, some 73 U.S. auctions have been held, 27,484 licenses sold, and $52.6 billion paid. The reform is a textbook example of economic policy success. We examine Coase’s seminal 1959 paper on two levels. First, we note the importance of its analytical symmetry, comparing administrative to market mechanisms under the assumption of positive transaction costs. This fundamental insight has had enormous influence within the economics profession, yet is often lost in current analyses. This analytical insight had its beginning in his acclaimed early article on the firm,6 and continued into his subsequent treatment of social cost. Second, we investigate why spectrum policies have stopped well short of the property rights regime that Coase advocated, considering rent-seeking dynamics and the emergence of new theories challenging Coase’s property framework. One conclusion is easily rendered: competitive bidding is now the default tool in wireless license awards. By rule of thumb, about $17 billion in U.S. welfare losses have been averted. Not bad for the first 50 years of this, or any, Article appearing in Volume II of the Journal of Law & Economics.
    Date: 2009–11
  13. By: Leo F. Goodstadt (Hong Kong Institute for Monetary Research ,Trinity College, University of Dublin ,The University of Hong Kong)
    Abstract: This paper explains why, despite the anti-Keynesian convictions of officials and academics, Hong Kong abandoned its initial commitment to the concepts of virtuous markets and moral hazard and resisted importing the prevailing Anglo-American regulatory ¡¥culture¡¦. It reviews foreign attacks on the government¡¦s intervention to protect financial markets during global crises and shows that these critics have misunderstood the limits of Hong Kong¡¦s attachment to laisser faire. The analysis traces the process by which increasingly strict regulation has been introduced without hindering the expansion of Hong Kong¡¦s role as a major international financial centre.
    Keywords: Laisser Faire, Autonomy, Regulation, Competition, Moral Hazard, Virtuous Markets, United States, United Kingdom
    Date: 2010–01
  14. By: James B. Ang; Rajabrata Banerjee; Jakob B. Madsen
    Abstract: Theory, historiography and empirical evidence suggest that agriculture is the key to economic development. This paper examines the extent to which productivity advances in British agriculture in the period 1620-1850 were driven by technological progress. Measuring technology by patents and new book titles on agricultural methods, the results indicate that technological progress has played a significant part in productivity advances. Furthermore, the results show that research effort has permanent growth effects, consistent with the prediction of Schumpeterian growth theory.
    JEL: N13 O30 O40 Q16
    Date: 2010–04
  15. By: James M. Acheson (University of Maine); Roy Gardner (Indiana University, Kyiv School of Economics)
    Abstract: Most of the worlds' marine fisheries are overexploited or endangered, including the New England groundfishery, once one of the world’s most prolific. After 35 years of management, stock sizes and catches are lower now than ever. We argue that New England groundfishermen are caught in a prisoner’s dilemma, from which they have failed to escape. We then suggest a set of policies to get these groudnfishermen out of their dilemma.
    Keywords: Fishermen's dilemma, fishery management, New England fisheries
    JEL: Q22
    Date: 2010–04
  16. By: Vinokurov, Evgeny
    Abstract: The paper is focused on the official Kazakhstani position towards Russia and its development over 1991-2000, i.e. the two post-Soviet decades. We draw upon speeches by the representatives of the state, most importantly by Kazakhstan president Nursultan Nazarbayev, and the intergovernmental acts. The paper provides substantive analysis and structurisation of the evolution of the Kazakhstani official position towards relations with Russia. It also provides various aspects of interpretation of this process, as we set the rhetoric against the economic cycles and exogenous events.
    Keywords: Kazakhstan; Russia; CIS; foreign policy
    JEL: F15 F13 P20
    Date: 2010–03
  17. By: Leo F. Goodstadt (Hong Kong Institute for Monetary Research, Trinity College, University of Dublin, The University of Hong Kong)
    Abstract: This paper uses four case studies to review the performance of the Anglo-American regulatory ¡¥culture¡¦. In the decade before the global financial crisis, American and British officials were almost identical in their analysis of and non-interventionist responses to identified threats from changing financial conditions in Asia; dependence of new financial products on the insurance industry; shortcomings of the rating agencies; and excesses in their property markets. They now acknowledge these past policy errors but continue to resist consumer protection and other reform initiatives.
    Keywords: Asia, China, Derivatives, Insurance, Credit Ratings, Property, Consumer Protection
    Date: 2009–11
  18. By: Janvier D. Nkurunziza
    Abstract: The financial sector in Burundi has had a very limited effect on the country's development. High political and economic risks have prevented banks from engaging in long-term lending, constraining long-term investment. Moreover, the industrial organisation of the financial sector is not conducive for development lending because the sector is used more as a source of rents than development finance. As a result, the financial sector has been unable to address the needs of the core drivers of growth in Burundi, namely, agriculture and industry. Therefore, increasing the financial sector's participation in Burundi's economic development will require an improvement in political and macro-economic stability, as well as an increase of financial institutions' long-term re-sources. Most particularly, development banking should play its role of fostering the development of agriculture and the rural economy. In addition, more competition in the financial sector should be encouraged with the aim of diversifying financial services and pushing the sector's boundaries beyond the traditional urban market to embrace the rural economy where most economic activities take place.
    Date: 2010–03–15
  19. By: Ahmad, Mohd Izhar; Masood, Tariq; Khan, Mohd Saeed
    Abstract: The paper is an attempt to analyse the working of Takaul in the world and its popularity in the insurance sector in the world. Keeping in view of Sharia we have also tried all possible aspects of insurance system popular in the world and tried to look at its possibility to familiarize more amongst Muslims of the world. It is observed that customer awareness remain low, however this is often attributed to a limited understanding of Islamic finance in the banking and insurance world. We wish to have a proper salesmanship and advertisement of Islamic banking system in India and all around the world.
    Keywords: Islamic Banking; Takaful
    JEL: A10
    Date: 2010–01–10
  20. By: Dobrin, Marinica (Universitatea Spiru Haret, Facultatea de Management Financiar Contabil)
    Abstract: This paper presents features of records related to general insurance in Romania in terms of harmonization with European directives specific to insurance. Specific records show mainly life insurance: income and expenditure accounts of the operations of insurance (premiums written record, the record collection of insurance premiums, cancellation of insurance policies, recording compensation expense), accounting for costituirea operations and use of technical reserves (accounting reserve premiums, claims reserve accounting, reserve accounting for Unexpired risks, catastrophe reserve accounting, reserve accounting for benefits and risturns).
    Keywords: insurance; income; expenses; premiums underwritten; profit/loss year; insurance intermediaries; insurance policy; compensation; technical reserves; premium reserves; reserves for damages; unexpired risks reserve; reserve expenditure equalization; reserve for disaster
    JEL: A11
    Date: 2010–04–25
  21. By: Alasrag, Hussien
    Abstract: The world economy is still suffering the crisis, considered the most severe since the Great Depression, where economic downturn at historic magnitude and many countries across the globe, irrespective of their development level, are still under strain dealing with this crisis. The severe global crisis that has spilled from the financial sector to the real economy, including international trade in manufactures, commodities and services. The onset of the present crisis can be traced back to July 2007 with the liquidity crisis due to the loss of confidence in the mortgage credit markets in the United States. At first, there was uncertainty about the possible spillovers to the rest of the economy, and there was also discussion about the risks of contagion and decoupling, that is to say, the capacity of other countries – especially developing countries – to isolate themselves from the problems originating in the United States (which is the largest market for many countries). The hope was that the crisis would be restricted to financial markets, with few repercussions on the real economy and the rest of the world. This hope was shattered in September 2008 as the crisis entered an acute phase, with strong downward fluctuations in the stock markets, substantially reduced rates of economic growth, volatile exchange rates, and squeezes in demand and consumption, leading to falls in industrial production and decreasing flows of international trade and FDI, and causing impacts on related areas such as transfer of technology. The crisis has also been accompanied by increases in unemployment, with concomitant declining incomes and demand. The severity of the current crisis has led to the evaluation of the foundations of the capitalist financial system and the search for ideas and solutions. While some have proposed that the Islamic finance serves as a vehicle for recovering from the international financial crisis and The Islamic banking industry may be able to strengthen its position in the international market as investors and companies seek alternate sources of financing. Other economists have argued that Islamic finance, is a different way of structuring financial dealings; but, it is not a totally different financial system. This paper tries to note the main causes and the impacts of the current financial and economic crisis. In addition to discuss the belief that the Islamic finance and its prospective is a viable alternative to the ailing global financial system.
    Keywords: financial and economic crisis ; Islamic finance
    JEL: F37 D53 G2 Z12 N2 E4 F33 G21
    Date: 2010–04
  22. By: Estrada, Fernando
    Abstract: The main objective of this paper is to present a reading of The Arcades Project by Walter Benjamin in the context of the financial crisis, in particular, reflect from a few fragments of Benjamin's work appear to lie around a Black Swan. The recovery of the fragments of The Arcades seems appropriate at a time when the financial crisis should be taught as a deeper crisis. Walter Benjamin is placed beyond its time, with a powerful sense of observation worthy of emulation analytical.
    Keywords: Financial theory, markets, Black swan, stock markets, financial crisis, risk, Walter Benjamin, Arcades Project.
    JEL: A1 G3 G33 D84 D70 D8 C72 B5 D81 B50 D82 C70 C7 D0 D7 A13 A12 G0
    Date: 2010–04

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