New Economics Papers
on Central and South America
Issue of 2005‒03‒20
six papers chosen by

  1. Why Are Latin Americans so Unhappy about Reforms? By Ugo Panizza; Monica Yañez
  2. Reform Fatigue: Symptoms, Reasons, and Implications By Ugo Panizza; Eduardo Lora; Myriam Quispe-Agnoli
  3. Monetary Policies and Fiscal Policies in Emerging Markets By Ugo Panizza
  4. Fiscal Sustainability in Emerging Market Countries with an Application to Ecuador By Ugo Panizza; Alejandro Izquierdo; Carlos Díaz-Alvarado
  5. Wage Inequality in Post-Reform Mexico By Airola, Jim; Juhn, Chinhui
  6. Slow Passthrough Around the World: A New Import for Developing Countries? By Jeffrey A. Frankel; David C. Parsley; Shang-Jin Wei

  1. By: Ugo Panizza (Research Department, Inter-American Development Bank); Monica Yañez (Research Department, Inter-American Development Bank)
    Abstract: This paper uses opinion surveys to document discontent with the pro-market reforms implemented by most Latin American countries during the 1990s. The paper also explores four possible sets of explanations for this discontent: (i) a general drift of the populace’s political views to the left; (ii) an increase in political activism by those who oppose reforms; (iii) a decline in the people’s trust of political actors; and (iv) the economic crisis. The paper’s principal finding is that the macroeconomic situation plays an important role in explaining the dissatisfaction with the reform process.
    Keywords: Political economy; Reforms; Crisis; Latin America
    JEL: P16 O54
    Date: 2004–01
  2. By: Ugo Panizza (Research Department, Inter-American Development Bank); Eduardo Lora (Research Department, Inter-American Development Bank); Myriam Quispe-Agnoli (Research Department, Atlanta Fed)
    Abstract: Missing abstract.
    Date: 2004–05
  3. By: Ugo Panizza (Research Department, Inter-American Development Bank)
    Abstract: This paper surveys possible monetary policy options for emerging market countries. As the paper does not seek to enter into the fix versus flex debate, it only considers monetary policy options for countries with a flexible exchange rate. After making the point that the conduct of monetary policy requires a nominal anchor and surveying different types of nominal anchors, the paper suggests that most academics and policymakers agree on the fact that inflation targeting should be the nominal anchor of choice. Hence, the paper describes the main characteristics of an inflation targeting regime and discusses its applicability to emerging market countries. Next, the paper recognizes the necessity of coordination between fiscal and monetary policy and points out that, in order to conduct countercyclical fiscal policies, emerging market countries need to build fiscal institutions that allow accumulating surpluses during periods of economic expansion. The paper concludes by studying the applicability of inflation targeting to Egypt and finds mixed support for this option.
    Keywords: Monetary Policy, Fiscal Policy, Inflation targeting, Egypt
    Date: 2004–12
  4. By: Ugo Panizza (Research Department, Inter-American Development Bank); Alejandro Izquierdo (Research Department, Inter-American Development Bank); Carlos Díaz-Alvarado (Research Department, Inter-American Development Bank)
    Abstract: This paper surveys the recent literature on fiscal sustainability with particular focus on emerging market countries. It discusses the main elements that differentiate emerging market countries from industrial countries and then discusses how probabilistic models can help to evaluate fiscal sustainability in an uncertain environment. Based on this discussion, the paper uses Ecuador to illustrate an application of the probabilistic model, and of the framework to evaluate the impact of shocks to current account financing on sustainability.
    Keywords: Fiscal Sustainability, Debt, Default, Sudden Stop, Emerging Markets, Ecuador
    JEL: E62 O23
    Date: 2004–08
  5. By: Airola, Jim (Naval Postgraduate School); Juhn, Chinhui (University of Houston and IZA Bonn)
    Abstract: Using the Mexican Household Income and Expenditure Survey (ENIGH) covering 1984-2000 we analyze wages and employment in Mexico after trade liberalization and domestic reforms. We find that wage inequality and returns to post-secondary schooling increased rapidly during 1984-1994 but stabilized since that period. The end of inequality growth was due to a severe macroeconomic crisis which adversely impacted the better educated, an increase in education levels at the end of the 1990s, and a slowdown in skill demand in the latter half of the 1990s. Between-industry shifts, consistent with trade-based explanations, account for a part of the increase in skill demand during 1984-1994, but these types of movements actually reduced the demand for skill in the latter part of the 1990s. The equalizing impact of trade was offset by within-industry demand shifts which continued to favor more educated workers. The Mexican experience in the 1990s suggests that market-oriented reforms have a sharp initial impact on inequality which dissipates over time. However, the opening of the economy to trade, foreign capital, and global markets also leads to a more long-run increase in the demand for skill.
    Keywords: wage inequality, reforms, skill demand
    JEL: J31
    Date: 2005–03
  6. By: Jeffrey A. Frankel; David C. Parsley; Shang-Jin Wei
    Abstract: Developing countries traditionally exhibit passthrough of exchange rate changes that is greater and more rapid than high-income countries, but have experienced a rapid downward trend in recent years in the degree of short-run passthrough, and in the adjustment speed. As a consequence, slow and incomplete passthrough is no longer exclusively a luxury of industrial countries. Using a new data set %uF818 prices of eight narrowly defined brand commodities, observed in 76 countries %uF818 we find empirical support for some of the factors that have been hypothesized in the literature, but not for others. Significant determinants of the passthrough coefficient include per capita incomes, bilateral distance, tariffs, country size, wages, long-term inflation, and long-term exchange rate variability. Some of these factors changed during the 1990s. Part (and only part) of the downward trend in passthrough to imported goods prices, and in turn to competitors%u2019 prices and the CPI, can be explained by changes in the monetary environment. Real wages also work to reduce passthrough to competitors%u2019 prices and the CPI, confirming the hypothesized role of distribution and retail costs in pricing to market. Rising distribution costs, due perhaps to the Balassa-Samuelson-Baumol effect, could contribute to the decline in the passthrough coefficient in some developing countries.
    JEL: F3 F4
    Date: 2005–03

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