Trade Policies and Ethnic Discrimination in Mexico Alicia Puyana and Sandra Murillo

[Working Paper No. 03/2011] Given that the indigenous population in Mexico is the poorest segment of its society, this paper explores how inequality has been affected by the trade liberalisation put into effect after the eruption of the debt crisis in the early eighties and the coming into force of NAFTA. The focus is on the agricultural sector for two reasons: first, the regions with the highest concentration of indigenous population are specialised in agriculture; second, agriculture has been identified as the main loser from trade liberalisation. The paper presents direct and indirect evidence on discrimination at the municipal level…

The New Vulture Culture: Sovereign debt restructuring and trade and investment treaties Kevin P. Gallagher

[Working Paper No. 02/2011] The global community still lacks a regime for sovereign debt restructuring. But it has often been overlooked that the definition of a covered investment within international trade and investment agreements often includes sovereign debt. There is thus increasing concern that international investment agreements may become a ''court'' for sovereign workouts by default. In this context, this paper analyzes the extent to which investment provisions in various treaties may hinder the ability of nations and private creditors to comprehensively negotiate sovereign debt restructurings when a debtor nation has defaulted or is close to default on its government…

Modern Finance, Methodology and the Global Crisis Esteban Pérez Caldentey and Matías Vernengo

[Working Paper No. 01/2011] The conceptually unified theoretical core of modern finance, which includes the efficient market hypothesis, the CAPM, the Modigliani-Miller theorem and the Black-Scholes-Merton approach to option pricing, has been instrumental in the growth of the financial services industry, financial innovation, globalisation, and deregulation. The elevation of finance to the stature of a scientific discipline was successful in rendering irrelevant the long-standing moral concerns associated with capitalism and laissez-faire. This success was somewhat of a paradox, since the core theories/theorems were based on wildly unrealistic assumptions and did not stand out for their empirical strength. Overcoming this paradox…

Remittances and Reverse Flows in Developing Countries Anupam Das and John Serieux

[Working Paper No. 02/2010] This paper departs from the assumption prevalent in existing empirical literature that remittances are used either to increase consumption or to increase investment in developing countries. Instead, the present investigation demonstrates that a significant portion of remittances is no longer available for domestic resource mobilization when they are used for debt servicing, capital flight, or reserve accumulation (reverse flows). Empirical results obtained by employing Pooled Mean Group (PMG) approach on a panel of 36 developing countries over the period 1980 to 2006 finds that a one per cent increase in the rate of remittance flows increased…

Balance of Payments-Consistent Unreported Flows Edsel L. Beja Jr.

[Working Paper No. 01/2010] The paper develops a balance of payments-consistent procedure for estimating unreported flows. Using data between 1990 and 2007, total unreported flows of ten selected Asian countries is estimated at 80% of their 2007 combined GDP. The paper also examines the empirical relationship between the volume of reported and unreported flows. Unreported flows increase with increase in reported flows and economic growth as well as weaknesses in the governance of reported flows and accumulated unreported flows. In contrast, financial depth and governance of the real sector decrease unreported flows. Altogether, the results indicate that unbalanced financial and…

The Unnatural Coupling: Food and Global Finance Jayati Ghosh

[Working Paper No. 08/2009] The dramatic rise and fall of world food prices in 2007-08 was largely a result of speculative activity in global commodity markets, enabled by financial deregulation measures in the US and elsewhere. Despite the recent fall in agricultural prices in world trade, the food crisis has exacerbated in many developing countries where food prices remain high and even continue to increase. The financial crisis also directly operates to increase food insecurity by imposing constraints on fiscal policies and food imports in balance of payments-constrained developing countries, causing exchange rate devaluation through capital flight and adversely affecting…

Pension System Reform in Latin America and Potential Implications for the Chinese Case Daniel Titelman, Cecilia Vera and Esteban Pérez Caldentey

[Working Paper No. 06/2009] In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes fiscal unsustainability, low coverage levels and a high degree of segmentation and barely addressed the non-contributory element. Thus, the reforms have failed to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal outcome of the reform was worse than originally planned. Structural constraints such as the limited savings capacity of some population groups and the instability and precariousness of the…

A Perspective on the Growth Process in India and China Prabhat Patnaik

[Working Paper No. 05/2009] In critique of the current growth process being experienced in India and China where inequalities have increased dramatically despite extraordinarily high growth rates, this paper argues that an increase in inequality is built into the dynamics of the system through the non-using up of their “labour reserves”. Labour reserves continue to remain non-exhausted because at the rate of growth of labour productivity, which arises as a consequence of the shift in demand towards products that entail the use of technology with higher labour productivity, the rate of growth of labour demand does not adequately exceed the…