Transparency in Monetary Policy

MANFRED J. M. NEUMANN

The paper examines different aspects of transparency. Transparency serves democratic accountability by promoting public control. Specifically, the degree of transparency conditions inflation expectations, hence the central bank's scope for stabilization. Recent studies have put doubt on the notion that complete transparency is socially desirable. Here it is pointed out that the conclusion critically depends on an asymmetric modelling of stochastic preferences. The paper also reviews the pros and cons of revealing individual voting. A conclusion is that secrecy is to be prefered in monetary unions in order to shield governors from pressure by home governments.; Atlantic Econ. J., 30(4): pp. 353-64, Dec. 02 .©All Rights Reserved

Public Capital Formation and Labor Productivity Growth in Mexico

MIGUEL D. RAMIREZ

This paper addresses the important question whether public investment spending on economic infrastructure enhances economic growth and labor productivity in Mexico. Following the lead of the endogenous growth literature, it presents a modified production function which explicitly includes the positive or negative externality effects generated by additions to the public capital stock. Using cointegration analysis, the paper proceeds to estimate a dynamic labor productivity function for the 1955-94 period that incorporates the impact of the growth rate in the stocks of both private and public capital (as opposed to the flows) and the economically active population (EAP) (rather than the rate of population growth). The results suggest that (lagged) increases in public investment spending on economic infrastructure---as opposed to overall public investment spending---have a positive and highly significant effect on the rate of labor productivity growth. In addition, the estimates suggest that increases in government consumption expenditures may have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. Finally, the findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures on economic and social infrastructure to meet targeted reductions in the fiscal deficit as a proportion of GDP. (JEL O10, O50); Atlantic Econ. J., 30(4): pp. 365-78, Dec. 02 .©All Rights Reserved

A Rationale for Meeting Quotas Asymmetrically

J. PATRICK MEISTER AND ROBERT S. MAIN

Under certain conditions, otherwise identical, competing firms may find it jointly preferable to face differing degrees of trade barriers on individual products rather than symmetric trade barriers. The key is the ability to reduce marginal production cost via research and development. The economic significance of this insight is that there could be a role for a market for quota allotments. This insight also has applications to Voluntary Export Restraints in which a priori symmetric, restricted firms may prefer to have individual production levels allocated asymmetrically. This indicates the need for detailed studies of how quotas are met by individual firms. (JEL F12, F13); Atlantic Econ. J., 30(4): pp. 379-83, Dec. 02 .©All Rights Reserved

Asymmetric Effects of Inflation Shocks on Inflation Uncertainty

BARBARA CAPORALE AND TONY CAPORALE

The empirically documented regularity that dis-inflationary shocks are associated with larger output changes than are positive shocks presents an interesting puzzle to macro-economists. This paper presents, and empirically supports, a new explanation for this asymmetry. The authors show, using a TARCH model, that negative inflationary shocks result in greater inflation uncertainty than positive shocks. As Friedman [1977] argues, and a body of empirical evidence demonstrates, inflation uncertainty leads to lower output growth. Drawing on this explanation, this essay points to an avenue by which the output asymmetry of inflationary shocks can be explained. (JEL E30, E31); Atlantic Econ. J., 30(4): pp. 384-87, Dec. 02 .©All Rights Reserved

Jurisdictional Competition for Quality Standards: Competition of Laxity?

THOMAS APOLTE

Regulatory competition arises where governments mutually accept quality standards in a common market. It has been claimed that regulatory competition will be subject to market failure and lead to competition of laxity in a sense that only the lowest possible quality standards survive regulatory competition. In this paper, it is shown that these results do not need to follow. First, if not a large number of small jurisdictions but a small number of large jurisdictions compete for quality standards, then the resulting quality standards will end up above the minimum level, albeit still below an efficient level. If no subsidies are allowed in order to compensate for losses by producers working under strict quality standards, quality standards will generally converge to the level of the jurisdiction with the lowest quality preferences, but not below this level. A second argument against a competition of laxity result is that quality standards of governments may be better judged by consumers than product qualities by producers. As far as this is the case, regulatory competition may even be superior to a harmonized quality standard. (JEL D82, H77); Atlantic Econ. J., 30(4): pp. 388-401, Dec. 02 .©All Rights Reserved