GEI Working Paper Abstracts

Working papers produced by the research projects in the Global Economic Institutions Programme have begun to appear. They are available for £4/$8 each from: Subscriptions Officer, Centre for Economic Policy Research, 90-98 Goswell Road, London EC1V 7RR, UK.

Papers: [1-5] | [6-10] | [11-15] | [16-20] | [21-25] | [26-30] | [31-35] | [36-45]

[46-47]

Working Paper no. 26
The Fund, The Bank and the WTO: Functions, Competencies and Reform Agendas
David Vines
April 1997

This paper considers the functions, competencies and agendas of the International Monetary Fund, the World Bank, and the World Trade Organisation. It argues that for the Fund, the most important outstanding issues concern global macroeconomic policy co-ordination and sovereign debt questions; that the Bank must find a more appropriate range of financial instruments, a more responsive institutional structure, and a sharper intellectual focus; and that the WTO must develop new capacities and institutional competencies to deal with the trade-under-imperfect-competition agenda. It concludes with a discussion of the interconnections between these institutions, and with a sceptical look at recent demands for them to cooperate more closely, in the interests of ‘global coherence’.

Vines is Director of the GEI Programme. Contact: Institute of Economics and Statistics, University of Oxford, Oxford OX1 3UL, UK, tel: (44 1865) 271067/ 271090, fax: (44 1865) 271094, email: econdav@ermine.ox.ac.uk.

Working Paper no. 27
THE SPOT-FORWARD RELATIONSHIP REVISITED: AN ERM PERSPECTIVE
Ronald MacDonald
Michael J Moore

The relationship between spot and forward exchange rates is re-examined in this paper using Hansen's stability tests for cointegrating equations. Two numeraire currencies are used: the DM as the ERM's nth currency and the US dollar as a 'control'. The interesting feature is that while the spot-forward relationship displays broad stability against the dollar, precisely the opposite is true against the DM. We interpret the DM results in a target zone framework as suggesting a lack of credibility and attempt to model such using the general-to-specific modelling framework. This allows for spot interventions aswell as reaiignments and succeeds in identifying satisfactory stable relationships in each case. Our results also have implications for the appropriate way to test the unbiasedness of the forward exchange rate.

Working Paper no. 28
Violations of the 'Rules of the Game' and the Credibility of the Classical Gold Standard, 1880-1914'
Michael D Bordo
Ronald MacDonald
July 1997

This paper examines the recently noted finding that the Classical gold standard represented a credible, well-behaved, target zone system from the perspective of the well-documented failure of countries to play by the rules of the game in the classical period. In particular, we test an hypothesis of Svensson (1994) that a credible target zone can confer on a country a degree of independence in the operation of its monetary policy. We propose a number of ways of testing this proposition and implement them for a newly created monthly data base over the period 1880-1913. We demonstrate that the Classical gold standard worked in the way predicted by Svensson's model. This would seem to have an important bearing on the kind of institutional framework required for a modern day target zone (such as the Exchange Rate Mechanism of the European Monetary System) to function effectively and, in particular, to weather speculative attacks.

MacDonald is Professor of International Macroeconomics at University of Strathclyde. Bordo is Professor in the Centre for Monetary and Financial History at Rutgers University. Together they direct a GEI project 'Unexplained Relationships in Three Regimes of the International Monetary System'. MacDonald is also co-director, with Andrew Hughes Hallett, of a GEI project 'Optimal International Regimes and Global Economic Institutions'. Contact: Ronald MacDonald, Department of Economics, University of Strathclyde, 100 Cathedral Street, Glasgow G4 0LN, UK, tel: (44 20) 7548 3861, fax: (44 141) 552 5589, email: s.a.toland@strath.ac.uk

Working Paper no. 29
Development and Environment: Marital Difficulties at the World Bank
July 1997
Robert Wade

This is a study of the integration of environmental considerations into the work of a non-environmental, commercially-oriented, multilateral organization, the World Bark. It is based on many months of field-work inside the World Bank, studying the organization as an anthropologist studies a village. The paper first shows that the Bank's environmental work has grown very fast since the late 1980s, and now constitutes a major focus of Bank activity. it then presents evidence that for all the sheer amount of such work and for all the declarations about its centrality, environmental work is not well integrated into the Bank's core operations. The paper outlines two complementary explanations of this low degree of integration (the 'marital difficulties' of the subtitle). One is that the Bank adopted environmental objectives unwillingly and in the face of great resistance from most borrowing countries. it did so because US NGOs, the US Congress, and the US Treasury succeeded, in 1987, in making the costs of not expanding the Bank's environmental capacity too high. The sense of being forced to do something tli at was not properly the Bank's business, tied up with the negativism towards NGOs and towards the 'interference' of the US, cast a long shadow over the Bank's subsequent environmental work, orienting it towards the goal of keeping the external critics quiet. The second explanation relates to the Bank's internal price system, the primary incentives on operational staff. Part of the reason for the resistance to anything more than token environmental work before 1987, and for the subsequent continuing resistance to the integration of an environmental problematique into the Bank's operational work, is that the primary incentives remain those of a lending institution, related to moving projects through the project preparation cycle to Board approval. Environmental attention (especially given the hostile attitude of the finance ministries of borrowing governments) works against rather than in support of these incentives.

Working Paper no. 30
What Future for the EU's 'Old' Regionalism?
Christopher Stevens
Jul 1997

The question whether regional trade agreements are 'building blocks' or 'stumbling blocks' for the multilateral system has a strong empirical dimension. The details of such agreements are so complex, and the problems of establishing a convincing counterfactual so severe, that this empirical analysis can often be less than definitive. But the evolution of EU policy towards its preferential partners is providing a rare opportunity to make a judgement on one element of the issue: how far preferences extend or inhibit liberalism.

The EU is debating the future of its relationship with the 70-strong African, Caribbean and Pacific group for the new millennium. This paper argues that European preferences have been created through two waves, of which the ACP link, under the Lomé Convention, represents the first, and the Europe Agreements the second. The debate on the future of the 'old' regionalism may herald a third wave.

The paper identifies as the inherent dichotomy of Lomé and the bilateral agreements with Europe's southern and eastern neighbours that they represent a net improvement in the absolute market access to the European market, whilst also discriminating against some third parties that suffer a relative deterioration in their access. The tension between these two effects could be dissipated by an improvement in the absolute access of the less favoured partners. However, the paper argues that this is unlikely to happen. If the relative discrimination of the less favoured group is reduced, it will be through a deterioration in absolute net market access.